Industry Trend Analysis - Deeper Rosneft Relations Offer Lifeline To PdVSA - DEC 2017
The Latest: On October 15, Russian state-owned oil producer Rosneft reportedly reached a general agreement with Venezuelan national oil company (NOC) PdVSA to restructure its debt to Moscow. Russian Finance Minister Anton Siluanov stated that Moscow hoped to have a final arrangement in place for the repayment of nearly USD6.5bn in loans by the end of the year.
Implications: With over USD3.5bn of interest and principle bond obligations coming due in the next two weeks, PdVSA will be forced to play by Rosneft's rules if it hopes to avoid default. Falling crude production and exports has reduced the NOC's revenues significantly over the past few years. Given the importance of PdVSA to the Venezuelan government, authorities will likely do whatever it takes to keep the company afloat.
What ' s Next: Rosneft, therefore has significant bargaining power, suggesting it has the leverage to increase its stake and gain operatorship of key upstream developments in Venezuela in exchange for its assistance. This will be particularly important in the wake of fresh US sanctions which prohibit American banks from transacting with Venezuela, thereby limiting PdVSA's access to financing.