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Of all the oil exporting countries, Venezuela appears to be suffering the worst consequences from the rapid fall in oil prices last year. Russia and Iran may be running close seconds. Caracas says it has averaged $36 a barrel for its oil this year, well below the $60 planned in the state budget.
For several weeks it has been rumored that Venezuela has not been paying its bills and that payments on the order of $8 billion are due the oil service companies that do much of the drilling and keep the oil flowing. Last week troubles arose as several oil service companies, seeing no payments in sight, simply stopped working. In one case the Venezuelans actually seized a foreign-owned drilling rig after the company stopped work. In a second case a US oil driller stopped work at several locations saying that PdVSA owed it $100 million.
Short of a rapid rebound in oil prices there is no end to this problem in the offing. Caracas has been vocal in calling for still more OPEC production cuts which-short term–would make their situation still worse. The patience of Venezuela’s partners and contractors is clearly wearing thin. Should they start halting or slowing work en masse, Venezuela’s oil production is likely to fall, further exacerbating the situation. In some areas, local employees of oil service companies are only receiving partial pay despite government orders that the companies continue to pay their employees. Caracas appears to hope falling costs and lost business will force the oil service companies to renegotiate for less expensive contracts.
The only bright side to the situation is that Caracas has restarted talks with the French oil company, Total, about expanding its operations in Venezuela. Total was one of the companies hurt when Chavez nationalized much of the foreign oil production.