Rigged

0
BPC 340k Snubbing unit
Actually, not a whole rig – a Hydraulic Snubbing Unit like this one.

In a normal country, this story would be making headlines all over the place. In Venezuela, this week…not so much.

Venezuela has quietly seized control of two oil rigs owned by a unit of Houston-based Superior Energy Services after the company shut them down because the state oil monopoly was months behind on payments.

The seizure took place Thursday after a judge in the state of Anzoategui, accompanied by four members of the local police and national guard, entered a Superior depot and ordered it to hand over control of two specialized rigs to an affiliate of PDVSA, the state-owned oil producer.

PDVSA justified the equipment’s expropriation, calling it essential to the South American nation’s development and welfare, according to a court order obtained by The Associated Press. Company workers were instructed to load the rigs, known as snubbing units and used to repair damaged casing, onto trucks to be deployed at “critical wells” elsewhere, according to the document.

“It was like a thief breaking into your house, asking for the keys to the safe and then expecting you to help carry it away,” Jesus Centeno, local operations manager for Superior in the city of Anaco, said by phone. “Their argument was that we were practically sabotaging national production.”

Listen, I’m sure Superior is insured up the wazoo for this kind of risk, so it’s no skin off their back. For the most part, all that episodes like this do is jack up the cost of insuring future projects in Venezuela, a cost you can just go right ahead and subtract from the Venezuelan government’s take.

At the same time, though, they further cement PDVSA’s increasingly dismal reputation as a fundamentally unserious partner. And then we wonder why the Malaysians (and others) are scrambling for the exits. And then we wonder why Rafael Ramírez’s production expansion targets never seem to pan out.

Oh and, pillen la perla al final:

Centeno said Superior stopped servicing PDVSA in July after negotiations broke down over millions of dollars in unpaid bills stretching back to December. Removal of the equipment will take a few days, so Superior is also feeding and sheltering the police officers and PDVSA crew on site, he said.

Verga, no querrán un Toddy tambien?

[Hat tip: Dago]

1 COMMENT

  1. Francisco,

    Although no less outrageous, in principle, your post is somewhat misleading in the use of the photo and the use of the word “rig”. The equipment seized is worth less than $1 million. Below is the press release from the Superior Energy Services, Inc., the owner of the equipment:

    HOUSTON, Nov. 4, 2013 /PRNewswire/ — Superior Energy Services, Inc. (NYSE: SPN) today announced that the government of Venezuela has seized two of the Company’s hydraulic snubbing units from its facility in Anaco, Venezuela.

    Dave Dunlap, Superior’s President and CEO commented, “We are hopeful that in the coming weeks we can reach an agreement with our customer, Petroleos de Venezuela S.A. (PDVSA), to receive payments owed to us for work performed and to secure the return of our equipment. We are extremely proud of our dedicated local workforce in Venezuela who have provided a safe and efficient service to PDVSA for more than 15 years. We were the only company in Venezuela capable of providing live well snubbing services to PDVSA and were doing it with a local workforce who achieved an outstanding safety and performance record. Snubbing into a live well requires highly skilled personnel backed by an experienced management team and reliable equipment.”

    Superior has generated less than $10.0 million in revenue from Venezuela during the first nine months of 2013. The total amount owed to Superior from PDVSA is approximately $9.0 million. Net book value of the assets seized is under $1.0 million.

    • Thanks, fixed now.

      Am I the only one nervous about this bit – “Snubbing into a live well requires highly skilled personnel backed by an experienced management team and reliable equipment”? I mean, PDVSA is just gonna wreck these aren’t they?

      • Francisco,

        You are welcome. Yes, I think it is safe to predict that the value of that equipment to anyone will soon be zero, not to mention the production of the wells PDVSA may possibly damage in the process. I believe the expression is “Kids, don’t try this at home.”

      • This isn’t my field of expertise, but I got curious and found this article:
        http://www.rigzone.com/training/insight.asp?i_id=348

        I am an engineer, but I could only barely get the gist of this, because I am not familiar with the terminology or the technology. Suffice it to say that the use of this equipment requires, as advertised, “highly skilled personnel backed by an experienced management team.” That is why PDVSA contracted with Superior in the first place.

    • That’s not the point. THAT news story made its way around the world, and surely caught the attention of ANYONE in the petroleum industry. Had it been just a single crescent wrench which was confiscated the news value did tremendous damage to PDVSA’s already suspect reputation. Lesson? If you’re gonna steal, steal BIG.

  2. When I first read this article, the most chilling part was that it seems that PDVSA really needed to expropriate/grab/steal to try to secure the production in some “critical” wells.

    And now that Roy says that this equipment is, in relative terms, not really expensive, the chilling factor indeed increases…

      • Yeah, but couldn’t a company like PDVSA use a couple million USD and buy its own?. I’m not taking about paying due invoices, but just using a very small fraction of its “caja chica” to solve a pressing maintenance problem.

        Indeed, I think it should be easier to get a “firmazo” from a PDVSA honcho for a swift purchase than to follow the relatively convoluted way of coordinating with the judge, the police, the National Guard (and the Central Government, who should be in the loop for this kind of action), and get very bad press in the process.

        In a nutshell, in my opinion it doesn’t look like they CHOSE to do it this way, but they HAD to do it this way.

        • I think you are absolutely correct except on the “couple millions usd.” By the time PDVSA bought this through some intermediary (someones primo?), it’s likely 50 million or more. Isn’t that how it works in Venezuela? And then you need expertise to run it.

  3. They want to send a message that they are prepared to act violently and drastically if crossed . Its like thug who punches someone at the least provocation to show whose boss !! This is typical of Maduro who wants to be considered very though. !!

Leave a Reply