Venezuelan officials and oil executives have moved ahead with the migration of dozens of joint ventures to new terms approved in a sweeping government reform, but delays remain in finalizing the agreements needed to greenlight the projects, four sources involved in the preparations said.
Venezuela's oil ministry had set July 28 as the deadline to complete the migration of all existing projects, but the numerous permits and agreements linked to core contracts have created obstacles.
Among the requirements, there is a key weighted royalty rate introduced for those projects combining existing mature oil fields and new, untapped fields. There is also complex taxation depending on the type of project.
Companies seek flexibility on new and amended pacts
Executives have been arriving in Venezuela as flights allow following twin earthquakes last month to participate in negotiations to agree amended contracts or to sign fresh pacts for new companies interested in returning to the country or entering it for the first time.
Venezuela's authorities have not announced a formal extended deadline to complete the migration, but are telling companies there is flexibility to sign complementary agreements after the main contracts, according to the sources, who spoke on condition of anonymity.
Business organizations representing foreign companies and contractors requested a formal extension of the deadline earlier this month. The oil ministry did not grant it, arguing that most joint ventures have made progress on core contract negotiations. The hydrocarbon reform law, passed in late January, provided 180 days to migrate projects.
Many companies, including Italy's Eni ENI.MI, have preferred to sign production-sharing agreements for new oilfields, instead of joint ventures, seeking to reduce paperwork or work under more flexible terms.
Others fear their projects might be ultimately revoked and offered to new companies amid disagreements over pending debt and the fulfillment of previous investment plans.
There is no deadline for new companies to sign fresh contracts, but Caracas and Washington have been pressing firms to commit to investments.
The U.S. government is pushing a $100 billion reconstruction plan for Venezuela's energy sector, following the U.S. military's capture of President Nicolas Maduro and Washington's backing for the interim administration of acting President Delcy Rodriguez.
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