France's TotalEnergies and Norway's Equinor have divested their stakes in Venezuela's Petrocedeño joint venture to Corporation Venezonala de Petróleos (CVP), an affiliate of the state-owned PDVSA, both companies said July 29.
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TotalEnergies and Equinor transferred their 30.32% and 9.67% stakes in Petrocedeño, respectively, giving PDVSA 100% control of Petrocedeño.
The Petrocedeño project is a key asset for the OPEC member, as it includes the Juni oil field in the Orinoco Belt and an upgrader that blends extra-heavy crude oil into lighter crude.
It has a production capacity of 202,000 b/d but output from this project has recently been very low due to a lack of diluents to blend the heavy crude, as the country faces huge economic and technical issues curbing its crude output.
The Orinoco Belt, the main oil production area in Venezuela, is a huge reserve of extra heavy crudes with high acidity and heavy metal content. It is estimated to contain 220 billion barrels of crude.
Low carbon focus
TotalEnergies President of Exploration & Production Arnaud Breuillac said this deal demonstrates that the company is now focusing its "new oil investments on low carbon intensity projects, which does not correspond to extra-heavy oil development projects in the Orinoco Belt."
"This transaction carried out for a symbolic amount in exchange of a broad indemnity in relation to the past and future participation of TotalEnergies' in Petrocedeño, results in the recognition of an exceptional capital loss of $1.38 billion [in the second quarter of 2021]," the company said in a statement.
However, the French energy major still holds stakes in the Yucal Placer gas field and in Plataforma Deltana block 4 in Venezuela.
Equinor said this transaction means it can focus "its portfolio on international core areas and prioritized geographies where it can leverage its competitive advantages."
Many foreign oil companies have left Venezuela in the past few years as the country's economic crisis has crippled its oil production and hampering upstream operations.
TotalEnergies have previously admitted its Venezuelan operations have been severely hampered by the lack of staff, water and power in the country.
Venezuela's crude production has averaged as low as 530,000 b/d for the first half of 2021, according to S&P Global Platts OPEC survey data. Its steep descent production began at the end of 2015 when it produced around 2.5 million b/d.
The Trump administration imposed sanctions on PDVSA in January 2019 and since then the decline has accelerated. Its crude output could rise to 700,000 b/d in 2022, according to Platts Analytics.
Venezuela's oil sector has been plagued by spiraling debt, mismanagement, corruption, crumbling infrastructure and a lack of investment since the late socialist Hugo Chavez became president in 1999.