Venezuela’s PDVSA to Securitize Oil Debts as Production Falls

Venezuela’s PDVSA to Securitize Oil Debts as Production Falls

According to the President of the Venezuelan state oil company PDVSA, Eulogio del Pino, who is also Venezuela’s Oil Minister, the company is currently in talks with other oil services companies to turn unpaid bills into financial instruments, reported Reuters. This process of creating value from the various types of contractual debts is known as securitization.

In June 2016, Del Pino said that PDVSA has signed financing agreements with Weatherford International Plc and Halliburton Co and was close to sealing a deal that would allow Schlumberger to boost its presence in the country.

Del Pino said: “We trade commercial debt for financial debt, which allows them to improve cash flow and to hold instruments with a financial return in order to manage the low-price environment.”

The decision came as a result of the recent trend where several oil services companies suspended or slowed operations this year in Venezuela due to difficulties in obtaining payment from PDVSA, which is struggling because of low oil prices and a decaying socialist economy.

Oil Price noted that Venezuela’s oil production has meanwhile decreased by 170,000b/d since the start of 2016 to 2.18mb/d, a 13-year low as the economic crisis continues to negatively affect the nation’s remaining source of export revenue.

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