Friday, December 8, 2023
 
 

Putin pours money into Venezuela oil production

Russia's Rosneft, Caracas agree on $14 billion oil, gas investment

- Advertisement -

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.

follow on twitter @energyinsider

- Advertisement -

Subscribe to our newsletter

Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

Latest

Don't miss

Ukraine’s persecuted mayor

Lest it be forgotten, the major thematic issue in post-Maidan and pre-war Ukraine was, and continues to be, the transformation of Ukrainian society along...

Cameron’s return as Foreign Secretary raises UK’s international profile

David Cameron, who was made foreign secretary in a surprise move by Prime Minister Rishi Sunak during his cabinet reshuffle on November 13, brings...

Russia’s powerful economic levers over Armenia

Armenia's relations with its strategic partner Russia are getting worse and worse and its leaders seem to desire a shift in geopolitical orientation towards the West....

Economy Minister says Kazakhstan to expand investment and diversify trade with Europe

Kazakhstan’s Minister of National Economy, Alibek Kuantyrov, spoke to NE Global in an exclusive interview about his country's relations with Europe, Astana's economic partners,...

Meeting conditions for Georgia’s EU accession is a tall order for Tbilisi

The European Commission’s provisional endorsement of Georgia’s EU chances contained a not-so-subtle message couched in diplomatic jargon: Tbilisi must forge a stronger national consensus...

New US actions against corruption and Russian malign influence in the Western Balkans

On November 16, the US Department of the Treasury’s Office of Foreign Assets Control, known by its acronym OFAC, designated eight individuals and six...

The EU Green Deal is a barrier to trade and global partnerships

There is an English saying that if you can’t see the wood for the trees, then you should step back and then you will...

IEA warns transitions bring new risks to energy security

Clean technology and critical mineral supply chains are highly geographically concentrated, the International Energy Agency warned in its World Energy Outlook for 2023 and...