French oil company TotalEnergies and Norway’s Equinor decided to quit a key venture in Venezuela, adding to an exodus of foreign firms in recent years as the country’s energy industry has withered.
The will transfer to state-owned Petroleos de Venezuela SA, or PDVSA, stakes in the Petrocedeno oil production joint venture, TotalEnergies said in an emailed statement. TotalEnergies, which had a 30% stake, said the transaction will result in a $1.38 billion capital loss. The French company and Equinor, which held 10%, had been major partners with PDVSA since the 1990s.
The Petrocedeno venture includes operations at an oil field in the Orinoco Belt and a heavy oil upgrader, a facility that blends heavy oil into a more commercial grade. After the move, PDVSA will own 100% of the venture. TotalEnergies said the plan is in line with efforts to curb its overall carbon footprint. The transaction was first reported by Bloomberg.
TotalEnergies’ decision “is not related to the political situation in Venezuela or to the sanctions situation,” Chief Executive Officer Patrick Pouyanne said on a conference call Friday. “Petrocedeno will indeed require in the near future a significant amount of capex to restore the production with new wells and to rejuvenate the upgrader,” which would not be “consistent with our hydrocarbon strategy.”
TotalEnergies was among the top four international producers of crude in Venezuela as recently as the mid-2000s, with its output ranking second among international companies in 2007, according to PDVSA statistics. After late Venezuelan President Hugo Chavez expropriated oil companies and changed contracts during the early 2000s, TotalEnergies was one of a handful of foreign firms to keep operations in the country.
Even after U.S. imposed sanctions on Venezuela’s oil industry, the Petrocedeno venture continued to be one of the top-producing oilfields in the country, even as total production slumped to levels last seen in the 1940s.
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After refinery output dropped in Venezuela, causing fuel shortages, PDVSA this year decided to integrate some of the Petrocedeno plants into PDVSA refineries, aiming to help boost gasoline production. TotalEnergies and Equinor were not part of the decisions leading to this integration, people familiar with the matter said.
PDVSA said in a statement that the exit of both companies followed “an extremely successful negotiation.” The Petrocedeno upgrader, which is operating again after a long period of inactivity, will now be the focus of oil production in the Orinoco Belt, it said.
“Now Venezuela is absolute owner of one of the most powerful companies in Latin America,” PDVSA said.
Equinor did not respond to requests for comment. PDVSA declined a request for comment.