Venezuela’s President Nicolas Maduro said Caracas and Russia’s sanction-hit Rosneft have agreed on around $14 billion in investment in the South American country’s oil and gas sector.
Maduro said on May 27 he met with Igor Sechin, the CEO of Russia’s top state-owned oil producer, earlier in the day. PDVSA (Petroleos de Venezuela) President Eulogio del Pino was also present at the meeting. “We had a great meeting and agreed on investment of over $14 billion,” Maduro said during a televised broadcast, adding the funds would go toward doubling the oil production of Venezuela, which is a member of the Petroleum Exporting Countries (OPEC).
Alexei Kokin, a senior oil and gas analyst at UralSib Financial Corp in Moscow, told New Europe on May 28 that the deal sounds more like a declaration of intentions because Rosneft has not yet announced its capital expenditure plans and obligations under this new agreement. “There are too many unknowns in this picture so it does sound to me like a general agreement that Rosneft will contribute over an unspecified number of years to some unspecified project. Presumably it will be in heavy oil. It doesn’t really mean that Rosneft will prefer Venezuela to domestic projects because this is not guaranteed at all,” Kokin said.
PDVSA has formal ambitious targets to double national production to 6 million barrels a day by 2019, with 4 million of that projected to come from the so-called Orinoco Belt, which runs through the northeast and into the Caribbean Sea. The oilfields in the Orinoco oil basin and offshore give Venezuela the world’s largest-known reserves. The belt has more than 250 oil and 19 gas fields. The Junin and Carabobo heavy-oil deposits are located in the west of the area. “Its oil richness has been known for a long time but things haven’t moved much for Venezuela in terms of bringing that potential new production on-stream,” Kokin said, adding that it requires massive investment and modern technology. “Rosneft has access to the best technology in the world. Its Russian operation is pretty diverse in terms of the types of reservoirs, in terms of geological conditions. It has experiences every type of onshore of reservoir, except shale,” he said.
However, Kokin stressed that financing is the bigger and most sensitive issue for Rosneft. Russia has suffered economically under the sharp drop in oil prices, which was compounded by Western sanctions for the annexation of Crimea and Moscow’s role in eastern Ukraine. “Rosneft can’t really borrow outside Russia much, if at all. In the short term I really doubt it will be able to divert any significant funds to Venezuela,” he said, adding that because of the sanctions even those Russian companies that have not been sanctioned directly have difficulty raising money, including Gazprom. “Rosneft actually has been sanctioned directly so it has even greater difficulty,” Kokin said.
Meanwhile, Russia and Venezuela will also look into developing the Latin American country’s gas sphere. During a visit to Moscow in January where Maduro met with Russian President Vladimir Putin, the Venezuelan head of state mentioned that the two countries would increase the number of joint exploration projects.
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