Venezuela’s government has suspended 19 production-sharing agreements with private oil companies, Reuters has reported, citing unnamed sources. The deals are for projects in Lake Maracaibo, the Orinoco Belt, and several mature fields.
The companies operating under these production-sharing agreements include Chinese, U.S., South American, and Venezuelan players, the sources also said.
The agreements would now be reviewed by the Venezuelan and U.S. governments, with some of them possibly ending canceled, the sources also told the publication. The suspension has had no effect on Venezuela’s total oil output, they added.
A month ago, Venezuela’s parliament passed legislative changes to the country’s oil law seeking to attract more foreign investment. Per the new law, private companies “will assume full management of the activities at its own expense, account, and risk, after demonstrating its financial and technical capacity through a business plan” that will be subject to approval by the Venezuelan oil ministry. The ownership of the resources to be developed by private companies, however, will remain with the Venezuelan state.
At the same time, these foreign operators would have control over the production and sales of Venezuelan crude, effectively meaning an end to the monopoly of state-owned major PDVSA.
Venezuela could generate as much as $5 billion from oil sales over a few months, U.S. Energy Secretary Chris Wright said earlier this month. “Sales today are over a billion dollars, and in fact, we have sort of short-term agreements over the next few months that will bring in another $5 billion,” he said during a visit to Venezuela.
Secretary Wright also said Venezuela’s crude oil and natural gas output could increase dramatically as soon as this year. The country currently produces around 1 million barrels of crude daily. Some of that is produced under those production-sharing agreements that are now being frozen and reviewed.
By Charles Kennedy for Oilprice.com
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