The Venezuelan state-owned oil company, Petroleos de Venezuela (PDVSA), is in troubled waters, after having been forced to borrow money in order to pay its mounting outstanding bills to contractors.
PDVSA’s debts have been mounting up since the dramatic, and swift, decline in price of crude since July of last year. The company has publicly announced that it is hoping to negotiate what it calls “overvalued contracts”, following the 53% drop in the price of oil from the record peak.
It is though that the figure in the red totals in the billions (of dollars), and is owed to a combination of both domestic and foreign oil field services contracting companies.
Meanwhile, PDVSA is still in talks regarding a $1.5 billion loan facility with the Japan Bank for International Cooperation, which was confirmed by Finance Minister Ali Rodriguez, on Wednesday. The result of discussions may result in the loss of appetite for investment in Venezuela from Japanese companies, as they would be fully exposed to risks.
Following the inability to pay monies owed Dallas-based drilling company, Ensco International, has been the first to halt its operations in the South American nation.
Rafael Ramirez, the Venezuelan oil minister, said that the money outstanding is set to be raised by selling bonds in Venezuelan Bolivars. Details of how much debt will be taken on by the sale of the bonds, or when the sale will take place are yet unconfirmed, although the figure resulting from the upcoming sale of bonds is expected to be around the $3 billion mark.
Ramirez remarked that the proceeds would be used to “pay our national obligations”.
PDVSA previously announced that its outstanding debt totalled $14 billion last year; $5.6 billion of which was owed to contractors.
However, Ramirez – who is also the head of PDVSA – has firmly denied allegations that the nationalised company has cash-flow problems, and has offered assurances to counter such suggestions.
The Organisation of Petroleum Exporting Countries (OPEC) member nation Venezuela has been hit hard by a sharp decline in oil revenues since the beginning of the global economic crisis.
OPEC is hoping to see oil prices climb to as high as $75 per barrel by the end of 2009. While the price trend is higher, risks from both speculation and a weaker dollar remain prevalent.