Malaysia's Petronas to PDVSA: Buh-bye

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Don’t call us. We’ll call you.

Malaysia’s Petronas is withdrawing from the Petrocarabobo oil fields in the Orinoco Heavy Oil Belt, citing irreconcileable differences with the government. The money quote from the Reuters piece:

“One source close to the project told Reuters that frequent changes in the fiscal framework, disagreements with the government of Chavez’s successor – Nicolas Maduro – about the business terms, and long delays led to the decision to withdraw.”

Petronas had already dished out $1.05 billion, and was expected to dish out an additional $1 billion to finance PDVSA’s stake in the project. Curiously, Petronas has not found a buyer for its stake in the project.

The other interesting aspect of this withdrawal is that Malaysia was building a refinery that would be fed by the Orinoco crude. By withdrawing, Malaysia is signalling that it does not believe the project will come to fruition.

This rupture is all the more curious given how Malaysia and Venezuela share a particular dislike for dissenters.

NOTE: I’ll be in Barcelona (Spain) the next two weeks, so I won’t be blogging. If there are any readers in the area that want to meet up, send me an email to nageljuan at gmail dot com.

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  1. “Curiously, Petronas has not found a buyer for its stake in the project.”

    Au contrair! I understand that a delegation of Asians, led by one Dennis Rodman (he’s kinda Asian) is currently winging its way to Caracas to put-in North Korea’s bid for the project. A scrap pile of used MIG 21’s from Panama will be used as a down payment.

    • “A scrap pile! Word on the street is that the contract for the repainting of the, actually brand-new, Migs in ARCR, Approved Revolutionary Camouflage Red, has ben awarded to Werewick Associates at the knockdown price of $3,250,000 per plane and $793,000 for paint for the spare wings (1 per aircraft unit) already bought against the eventuality of in-flight wing disfunctions; such paint has been acquired but will be applied only in case of need, at extra cost, after convincing proof of actual disfunction by Werewick’s elected inspectors whose service rates can be found in exhibit 3 hereof(to). “Word-on-the-street”: never leave home without it!

  2. Malaysia’s withdrawal is a warning to other nations about dealing with Maduro. Venezuela will have to pay huge premiums to the next company that comes in.

    It is also a warning to Maduro that he does not control other countries and needs to be fair in any dealings.

  3. Its really quite simple , The regime out of a spirit of proud patriotism cant allow any offshore oil company to hold more that a 40% participation , and insists that pdvsa’s disfunctional management hold control over day to day operations . Because Pdvsa has no money to fund its 605 participation it requires the offshore partner to put up the missing funding for executing the Project in its behalf ( repayable from the new company’s proceeds in the indefinite future) . Because the management is so inept operations get stuck and execution proceeds at snail space . Making money from a Venezuelan extra heavy crude investment thus requires great patience , big big pockets , and a lakadaisikal view of business profits . In short you have to be Chinese !! Evidently Malasya lacks the generous long term geopolitical perspective of its Chineses neighbors. No other takers ?? why surely now the Chinese will be invited to take advantage of this unique opportunity for increasing its presence in Venezuela .

    • Actually, the Chinese have been extra careful in participating in the faja. They were offered various areas for the taking, if they lent money to PDVSA for it and they said no. Russians and Italians and non-players have ben the crazy ones. Petronas is a well managed company, it made US$ 16 billion in profits in 2012, more than PDVSA, despite that country producing less than a million barrels of oil per day.

      • If you are calling Russians the crazy ones, you should check the biography of the chairman of Rosneft, the Russian company in question. His name is Igor Sechin. You can apply many unflattering terms to him, but “crazy” ain’t one of them 🙂

        You don’t mess about with people like Sechin. You don’t get to pocket his money and deliver nothing in return, the way PDVSA did with Petronas. If they try to pull something like that with Rosneft, Maduro and his pals will end up playing the ground meat in empanadas.

  4. It is not surprising that Petronas is withdrawing from the Project. What companies want to be in a country where there is a chance that their equipment and projects could be sabotaged by right wing terrorists as occurred in Amuay and more recently in Puerto la Cruz.

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