Global Processing

Venezuela''s oil company slashes costs, warns contractors not to halt rigs

March 9, 2009
Venezuela''s top oil official said the government is slashing the amount it spends on oil industry contractors by 50 percent because of low crude prices. According to the Associated Press, Petroleos de Venezuela SA, or PDVSA, is renegotiating service contracts in an effort to reduce costs, Oil Minister Rafael Ramirez told reporters. Venezuela relies on oil for 94 percent of exports and nearly half the government''s budget, but prices for Venezuela''s heavy oil basket have plummeted more than 70 percent from last July''s average price of $129.54 a barrel -- to an average $38.73 most recently. Ramirez warned contractors against trying to halt work to demand payment or they would take over the rig like they did Ensco. Dallas-based Ensco International Inc. said that it suspended operations on an oilrig off Venezuela''s Caribbean coast because it was owed $35 million, prompting PDVSA to take over operations. Many service providers have been complaining of delayed payments for months. Ramirez said PDVSA has recently paid off debts to 94 percent of its more than 5,700 service contractors, but is still in negotiations with 56 service companies. Venezuela has 266 active oil rigs -- 51 of which belong to PDVSA and the rest of which are contracted. Four of Venezuela''s oilrigs have been halted because of recent OPEC production cuts, while 17 have been temporarily stopped for routine maintenance.