New leader of PdV to revitalise 1,000 mature wells
Venezuela's PdV leader Eulogio del Pino's pragmatic plans will aim to boost the country's oil production
The new head of Venezuela’s state-run producer PdV, Eulogio del Pino, appears to be focused on bringing some much-needed pragmatism to the struggling state oil company in his first days on the job.
In one of his most significant moves since taking over as the head of PdV, del Pino last week outlined plans to boost the country’s flagging oil production by revitalising around 1,000 mature wells in the west of the country. “With this project, we have selected nearly 1,000 wells that will be the first to be reactivated, which we hope will increase 60,000 to 70,000 barrels a day (b/d),” del Pino said during a trip to Maracaibo, Venezuela’s largest producing region. Venezuela’s oil production has been flat at around 2.5 million b/d for over a year, according to the International Energy Agency. “We need to make a greater effort to revive the wells in the shortest possible time,” del Pino said.
Del Pino did not set out any details of the plan or a timeline for the production increase. But last year, when he was the head of PdV’s upstream business, del Pino pushed a similar plan that, crucially, saw the private sector playing an integral role in boosting output from Maracaibo. The plan never appeared to make much progress, but with del Pino now at the head of the company he appears to be making a renewed push.
PdV reportedly planned to provide geological and drilling data for the wells, most of which have long been neglected by PdV, to interested private sector companies. The wells would then be auctioned off on a well-by-well basis, with companies receiving a cut of the oil sold and offered incentives to increase output.
The model would be somewhat similar to the service contracts offered by Mexico, before its major energy reforms, and other countries with relatively closed oil industries. The plan, though, may be difficult for del Pino to pull off. Turning to the private sector in is anathema to the Bolivarian revolution, and president Nicolas Maduro has been unwilling to do anything that might appear to be straying from the path laid out by his predecessor Hugo Chavez.
If followed through on, though, del Pino could be charting a much-needed change of course for PdV. A short-term focus on revitalising the mature Maracaibo basin could deliver quick production gains for cash-strapped PdV at a much lower cost than the Orinoco heavy-oil megaprojects that have been at the centre of the company’s strategy to increase oil output.
The Orinoco projects will require tens of billions of dollars of new investment in drilling as well as heavy-oil upgrading and pipeline infrastructure before they start to deliver. The existing heavy-oil upgraders are running at full capacity, meaning more capacity needs to be built before significant production gains are seen in the Orinoco belt.
With the Maduro government leaning on PdV more than ever to help it stay afloat amid the country’s deepening economic crisis, the company does not have the financial firepower to push the projects forward. And foreign investors are reluctant to put money into Venezuela as the economic crisis worsens and poor investment terms remain. That means the Orinoco’s output is effectively capped until Venezuela can find the investment to build new upgraders.
Back on track
Still, PdV and Venezuela’s oil future is in the Orinoco belt and del Pino’s biggest challenge will be getting those projects on track after years of delays and disappointment. Del Pino’s predecessor, Rafael Ramirez, for years put out impossibly rosy updates and projections for the Orinoco projects, but little tangible progress was made. Del Pino acknowledged the slow pace of development and is pushing for more concrete progress. “The moment has arrived for us to move past the presentations and evaluations of the projects to the financing and construction,” del Pino said during a recent trip to the Orinoco Belt.
Signs of pragmatism have also been seen elsewhere since del Pino took the helm at PdV. During a recent trip to New York for a UN summit, Maduro appeared to publically ditch the government’s plan to sell off its US unit Citgo. In recent months, Ramirez and Maduro said they had put the business up for sale and were looking for offers of around $10 billion. That would provide PdV and the Venezuelan treasury with a badly needed cash injection, but Citgo is one of PdV’s strongest businesses and the loss of the steady income stream would be felt down the line.
Del Pino has also struck a markedly different tone than Ramirez in his first days on the job. While Ramirez’s speeches were dominated by Chavista-style revolutionary rhetoric focused on party and politics, Del Pino’s speeches have rarely strayed from the business at hand, with far more attention paid to the details of getting more of the country’s oil and gas out of the ground.