Unwanted in the U.S., old oil equipment finds a new home in Venezuela

HUMBLE, Texas, Sept. 14 (Reuters) - In the sweltering heat in Humble, Texas, just outside Houston, two workers were flattening out a yard with heavy compaction rollers, making room for pre-owned and auctioned U.S. oilfield equipment destined for a hoped-for oil revival in Venezuela. At the edge of the yard sits a weathered, rusting heavy-duty commercial truck covered in dirt. The recently auctioned vehicle is one of a flood of trucks, rigs and other equipment bought up to facilitate an anticipated oil rebound in Venezuela, as U.S. businesses try to get in on Washington's about-face from seven years of sanctions on the OPEC nation to promoting a $100 billion reconstruction plan for the nation's industry. Venezuela's needs include rigs, pumps, valve stations, welding equipment, and other instruments, according to state-run PDVSA. That equipment is finding its way to U.S. ports from Texas, Oklahoma, Colorado and other states, in various stages of wear and tear. "Sometimes you get gems. Sometimes you get absolute trash," said Jesse Cole, CEO of Sky Drop Capital, an investment firm involved in acquiring equipment for Venezuela's operations. Guanta Express, a shipping intermediary named for a key oil port in Venezuela, operates the yard in Humble. The company is shipping goods from around the U.S. in cargo vessels to the ports of Guanta and Maracaibo, Venezuela's largest points of entry for the oil industry. "To the end of the year, we are going to be at full capacity. We already have orders lined up for the next two vessels," Greg Diaz, president of Guanta Express, said in an interview in Humble. Containers shipped by Guanta Express carrying workover rigs arrived and unloaded in Maracaibo last week, according to photos seen by Reuters. The company expects to move two 1,500-horsepower rigs in its next two shipments, the largest it has ever sent to Venezuela, Diaz said. Executives from companies including Chevron CVX.N, SLB SLB.N and Formentera Partners expect output capacity will need to expand in challenging basins, including Lake Maracaibo and the vast Orinoco Belt. That will require the procurement of more powerful equipment — like those large rigs shipped by Guanta Express — in coming months. Other energy shipments are expected at the western coast port of Guaranao, according to a terminal source. Interest from wildcatters looking to revive wells at mature fields is also expected to keep demand high for smaller workover rigs, analysts have said. Venezuela's oil production peaked above 3 million barrels per day in the late 1990s but is now around 1.25 million bpd following decades of underinvestment, corruption and foreign sanctions. PDVSA and Venezuela's oil ministry did not respond to a request for comment. The equipment rush started not long after the January 3 U.S. raid to capture then-Venezuelan President Nicolas Maduro. "The week after January 3rd, I started getting calls asking to move equipment from Houston," said Jorge Aponte, CEO of Houston-based PetroFarm. His company buys oil equipment directly from owners and operators across the U.S., allowing the company to verify maintenance records, operating condition and technical integrity. One such purchase was a 2014 workover rig from North Carolina, set to be shipped out of Houston this month. PetroFarm has also shipped two smaller workover rigs to Venezuela, with plans to send three more in the coming weeks. A small workover rig can cost around $350,000, Aponte said. One concern in the industry is the reliability of pre-owned and auctioned equipment, the latter of which often comes with thousands of hours of use and no warranty. In March, a three-year-old truck tractor used to move heavy equipment arrived in Maracaibo with a bright orange sticker distinctive of U.S.-based auctioneer Ritchie Bros., according to photographs seen by Reuters. The truck sold in December for $24,000 from the auctioneer's Newnan, Georgia, site, having already logged 5,551 engine hours and more than 140,000 miles. While the U.S. Treasury Department has eased a large portion of sanctions on Venezuela, helping pave the way for U.S. insurance firms to underwrite equipment, many providers are reluctant to get into the business, sources said. "The key issue for insurers is typically the lack of verifiable maintenance and inspection records," said David Peña, who leads the energy and power practice in Latin America for global insurance broker Marsh. Insurers may be less willing to offer coverage without independent inspections, or make coverage terms more restrictive, he said. Ritchie Bros.' policies state that there are no warranties, and the tractor truck listing also said no guarantees could be made. A company spokesperson said it operates "global, public unreserved auctions" where equipment is sold to the highest bidder.

Unwanted in the U.S., old oil equipment finds a new home in Venezuela

Used U.S. oil equipment heads to Venezuela

Larger rigs and more shipments are expected

Buying directly from owners to verify condition

Old equipment raises reliability and insurance concerns

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