CARACAS – Venezuela’s government plans to nationalize 11 oil drilling rigs owned by Tulsa, Oklahoma-based Helmerich & Payne in the latest takeover by the government of Hugo Chavez in a string of nationalizations in all sectors of the beleaguered economy as Chavez seeks to remake the country into Communist nation.
The rigs’ nationalization “will spur national production of hydrocarbons and strengthen the policy of full petroleum sovereignty,” Rafael Ramirez, the Energy Minister who is also Petroleos de Venezuela SA (PDVSA)'s president, said during a visit to the western state of Zulia.
Ramirez claimed that the rigs were being used by opponents of President Hugo Chavez’s administration to try to “boycott the production of crude in the country.”
“There is a sector that owns rigs that has refused to discuss rates for service with PDVSA and has preferred to keep the equipment in storage in Anaco, Anzoategui state, for a year; that is the specific case of the Helmerich & Payne (HP) company, a U.S. transnational,” Ramirez said.
The National Assembly has been asked to declare the rigs public assets so the government can take control of them, Ramirez said.
The company denied that was the case and said that they had finished their projects in 2009 and were awaiting payment on over $43 million owed by PDVSA from last year.
"Our dispute with PDVSA has never been very complicated and our position has remained clear: We simply wanted to be paid for work already performed. We stated repeatedly we wanted to return to work, just not for free. We are surprised by yesterday's announcement only because we have been in ongoing efforts in a good faith attempt to accommodate a win-win resolution, including a willingness to sell rigs," said Hans Helmerich, CEO of Helmerich & Payne.
"We have worked in Venezuela for 52 years and wanted to continue under reasonable conditions. At the same time, Helmerich & Payne has reduced its number of rigs in Venezuela in half since 1998. At that point, almost 30% of our land rigs were in that country, as compared to under 5% of our land rigs today."
According to the company, all 11 Helmerich & Payne rigs that formerly worked for PDVSA had completed their contract obligations during calendar year 2009. Since then, the land rigs had been idle in Venezuela and remained in the company's facilities there. As of June 14, 2010, PDVSA owed Helmerich approximately $43 million. In addition, the company was waiting on PDVSA to exchange the local currency bolivars for U.S. dollars as a result of PDVSA "unilaterally" paying U.S. dollar invoices (issued in 2007 and 2008) in local currency bolivars instead of dollars.
"Since July 22, 2008, the Company has had an outstanding application with the Venezuelan government requesting approval to convert local currency cash balances to U.S. dollars for dividend payment purposes. When and if the Venezuelan government approves this application, the Company's Venezuelan subsidiary is expected to remit approximately $14.2 million, adjusted for the January 2010 currency devaluation, as a dividend to its U.S. based parent," said the company. That amount had grown to approximately $30 million by the end of last month.
The company estimates that it has $67 million in assets in Venezuela, between property, plant and equipment and another $5 million in equipment inventories.
PDVSA racked up billions of dollars in debts with contractors in 2008 and 2009, and tried to force providers to renegotiate contracts when it ran short of money.
When companies balked -- and even when they didn't -- in May of 2009, Chávez took the companies and ordered the nationalizations of most of the oil service companies and their equipment.
In January of 2009, PDVSA took over a rig owned by Dallas-based Ensco International after it halted operations awaiting payment of $35 million. In December of 2009, PDVSA reportedly agreed to pay all of its debt to Ensco in exchange for a price cut of 30%.
In 2007, Mr Chávez nationalized four major oil projects, prompting Exxon Mobil and ConocoPhillips to leave the country and file for international arbitration rather than accept a minority stake. They are still awaiting resolution for their investments in the multi-billion dollar projects.
Other foreign companies, including Chevron and ENI that accepted the expropriations, stayed on, and earlier this year, Venezuela inked deals with Chevron, Repsol, ENI, YPF and other investors to develop new fields in the same oil-producing region in eastern Venezuela.
Historically, Venezuela has been one of the most important suppliers of foreign oil to the United States, but that importance has been diminishing, especially under Venezuela President Hugo Chavez. In 1960, Venezuela’s share of U.S. oil imports stood at 50%, but Venezuela now bounces between being the fourth and fifth largest supplier to the US, supplying only 9% of total US oil imports in 2008.
The United States is the largest importer of Venezuela’s oil exports.
In 2008, the United States imported 1.19 million bpd of crude oil and petroleum products from Venezuela, down from 1.36 million bpd in 2007.
Oil accounts for more than one-third of Venezuela's gross domestic product, more than half of government revenue and about nine-tenths of the country's exports.
Crude production has slumped slightly over the past two years – to 2.25 million barrels per day in May, according to the Paris-based International Energy Agency.
Helmerich & Payne, Inc. is primarily a contract drilling company. Prior to this seizure of 11 of its rigs, the Company had 214 U.S. land rigs, 39 international land rigs and nine offshore platform rigs.