No confrontations: Oil contractors look to negotiations with Chavez
- Two projects seized from Williams
- Wood Group eyes Venezuela pay-out
- Venezuela to seize services players
- Venezuela readies law to seize oil services
- Venezuela constitution favours arbitration
- PDVSA debts hit Williams
- Venezuela woe stings Williams
- Williams sees $241m write-offs
- No arbitration request for Carabobo
Oil contractors may dodge fight with Chavez
Oilfield services providers in Venezuela that saw their assets nationalised last week will probably opt to see what they can get through negotiation rather than fighting Hugo Chavez's government in arbitration.
Only 5% to 10% of the contractors that lost assets in the government seizures will seek compensation in international arbitration, said Wayne Wilson, executive at consulting company Protiviti in Houston.
Williams Companies and Tidewater were among contractors that had operations taken 8 May by state-owned PDVSA.
Wilson said service providers are not in a position to demand anything in negotiations.
“The rule of thumb is that if you want to stay in the country, you're probably stuck with negotiating,” Wilson told Bloomberg in a telephone interview.
Chavez, whose government had pressed for lower service rates after energy prices dropped, did not list all of the 60 companies whose assets he said were seized.
Schlumberger and Halliburton declined to say whether they were affected, Bloomberg reported.
If they were to lose equipment to nationalisation, the two companies would probably negotiate and pull out of the country as soon as possible, Brian Uhlmer, an analyst at Pritchard Capital Partners in Houston, said.
“They'll definitely want to hear what Venezuela wants to offer them,” Uhlmer said.
“I don't think they want to allow other countries to believe this is an appropriate way to gain leverage over companies.”
Halliburton spokeswoman Cathy Mann declined to comment.
Stephen Harris, spokesman for Schlumberger, also declined to comment.
PDVSA seized three gas-compressor facilities owned by Williams on 11 May.
The compressor operations had a net book value of $324 million at the end of last year, according to a public filing by Williams.
“We may not receive adequate compensation, or any compensation, if our assets in Venezuela are nationalised,” said the filing.
Williams has said it may pursue “all available options” including negotiation and arbitration.
ExxonMobil and ConocoPhillips are still working in international arbitration to be compensated for oil ventures that Chavez seized in 2007.
Houston-based ConocoPhillips recorded $4.6 billion in costs that year to reflect the loss of expropriated assets.
Companies that lose assets to nationalisation face few options if they want to negotiate, said Protiviti's Wilson.
Threatening to take the case to arbitration will almost surely shut down negotiations.
“Probably the best thing you can do from a leverage standpoint is refuse to provide technical assistance, but that may be a matter of cutting off your nose to spite your face because you may be missing out on potential income,” Wilson said.
Schlumberger and Halliburton would likely decide that they are better off getting rid of their operations in Venezuela and “not having the hassle”, said Uhlmer of Pritchard Capital.
“This is just more of a thorn in their side,” Uhlmer said.
“They have too many assets and too many talented people and too many good relationships in countries where they're profitable.”