Shell Seeking Sell-out On Its Venezuelan Oil Joint Venture Stake To France’s Maurel & Prom
(Photo: REUTERS/Isaac Urrutia/File Photo)
The Royal Dutch Shell Plc is now in negotiation with Paris-based Maurel & Prom for the sale of its stake in a Venezuelan oil joint venture, a trio of sources claiming knowledge on the issue tipped the press, as the company seeks to streamline its crude business with the struggling member of OPEC (Organization of the Petroleum Exporting Countries) and to put focus on its natural gas ventures.
According to Reuters, the Anglo-Dutch company is bailing out on its 40 percent joint venture stake in Petroregional del Lago with Petróleos de Venezuela, S.A (PDVSA), a state-run oil company, located in the western state of Zulia, near the border of Colombia.
The Reasons For The Sell-out
As revealed by the news agency, the Hague, Netherlands-headquartered company has been wary of illegal activities plaguing the area such as frequent theft of equipment.
There's also the issue of power interruption which nearly occurs on a daily basis that bothers Shell. On top of this is the recent dire condition in Venezuela like the economic recession which, as cited in a previous report here on Business Times, has caused a massive annual inflation rate that is now hitting close to half a million percent in September.
The International Monetary Fund has further warned on the continuing consumer price increase in the country which could reach at 1,000,000 percent before the year 2018 ends.
The hyperinflation obviously caused severe shortages of food and medicine which in turn resulted to the rise of criminal activities in most part of the country.
Furthermore, a report said that a lot of foreign companies that are doing business with PDVSA have been complaining on several issues like complicated bureaucracy, dodgy contracts, as well as the apparent lack of resources.
In Shell's case with Petroregional, industry sources said that the Dutch oil behemoth has grown weary and frustrated in receiving its dividends from PDVSA. Adding more to the problem is the latter's decision to ban minority partners from independently exporting crude output.
This all resulted for Petroregional to ultimately fail from reaching its income quotas while further affecting its profitability. In 2016, the joint venture project was able to yield a hefty 33,000 barrels per day of crude.
It remains to be seen if Maurel & Prom, an oil company in France specializing in the production of hydrocarbons, would be willing to fill in the slack left by Shell.
As further tipped by the unnamed sources, the Venezuelan government has come up with a fee scheme, which is basically an entrance bonus, that Maurel & Prom has to pay in order to gain access to the LatAm country's oil reserves.