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Nationalisations return to Venezuela's oil industry

Under late president Hugo Chávez, nationalisations were commonplace in Venezuela's oil patch. One of the most pressing questions facing investors since Nicolas Maduro, Chávez's hand-picked successor, won the presidency earlier this year has been whether he would continue the policy or seek to shape a more investor-friendly climate

All was quiet through the first six-months of Maduro's presidency as he sought to ensure potential investors that Venezuela was open for business and seeking help to boost slumping oil production. That changed last week when his government nationalised two oil rigs owned by Houston-based oilfield services company Superior Energy Services, according to an Associated Press report.

According to the report, a judge, accompanied by local police and national guard personnel, entered a depot housing the two rigs in the northeastern state of Anzoategui. Superior employees were then ordered to load the equipment onto state-run PdV trucks where they would be put to work elsewhere. "It was like a thief breaking into your house, asking for the keys to the safe and then expecting you to help carry it away," Jesus Centeno, a local operations manager for Superior, told the Associated Press. Centeno added that Superior had stopped providing services to PdV in July after it failed to reach an agreement over millions of dollars in unpaid bills going back to December. "Their argument was that we were practically sabotaging national production."

Late payment from PdV has been a consistent source of friction between the company and its service providers in recent years. In 2010, US oilfield services company Helmerich & Payne had a fleet of 11 drilling rigs nationalised after it shut down operations following a similar dispute over non-payment with PdV.

With that threat of nationalisation looming large over the industry under Chávez, companies had tended to prefer dealing with the payment issues behind closed doors.

Just before presidential elections to replace Chávez in April, however, Paal Kibsgaard the chief executive of Schlumberger, one of the largest foreign oilfield service providers in Venezuela, pressed the issue publicly. At a conference in New Orleans, he said that his company was reducing its activity in Venezuela over delayed payments from PdV.

In response, Rafael Ramirez, the head of PdV who has taken a hard line against foreign investors in the past, struck a conciliatory tone and promised to address the issue. He and Kibsgaard mended fences and just a couple of weeks later Schlumberger said that payment collections had improved and it was ramping up activity in Venezuela. The episode was seen as a potentially positive turn towards pragmatism for PdV.

Since then, however, it appears that the problem of non-payment has persisted and worsened for some foreign investors. In its latest quarterly report to US securities regulators, Schlumberger said that it continued to see delays in payments in Venezuela. The company does not publish how much it is owed but it is thought to be at least $600 million. Halliburton, another major US-based services provider to PdV, says it was owed $536m as of 30 September, compared with $491m at the start of the year.

Foreign investors were hoping that the days in which such disputes were solved via nationalisation were over with the new Maduro administration. Maduro's style has differed from Chávez's - a quiet court order and no official statement, where the late president would announce he was nationalising the company on live television. Nevertheless, the message will be received the same. And the latest move will undercut Maduro's  earlier signals that Venezuala would be a safe place to do business.

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