Industry Trend Analysis - Unpaid Service Providers Will Accelerate Upstream Woes - JAN 2018

BMI View: Unpaid oil field and transportation service providers will turn away from Venezuela, deepening production declines over the next several months. Lower production will exacerbate financial shortfalls at PdVSA, making it increasingly difficult for the Maduro regime to remain in power.

In the wake of an economic and political crisis, the government of President Nicolas Maduro has proven unable to balance its overwhelming debts while keeping the oil sector afloat. A lack of upstream revenues has forced the government to funnel all available funds towards debt repayments at the expense of investment into upstream development.

With a default by state-owned PdVSA now increasingly likely over the coming weeks, we maintain that investment into the sector will remain limited. PdVSA's remaining upstream partners holding minority stakes have largely shifted away, pending a more stable environment to ramp up operations ( see ' Upstream Partners Won't Come To PdVSA's Rescue ' , July 17). However, oil field service (OFS) and transportation providers have been largely ignored, and are awaiting an estimated USD19.8bn in unpaid bills.

Further Declines Ahead
Venezuela - Oil Directed Rigs
Source: Baker Hughes

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