Chevron Gives Venezuela Oil Producer $2B in Financing: Corporate Loan Tied to Increasing Production
Chevron has agreed to a $2 billion financing agreement with Petroleos de Venezuela SA (PDVSA) to help the state-owned oil producer boost its output of oil at their Petroboscan oil joint venture.
The loan's interest rate is relatively low, at the London Interbank Offered Rate (LIBOR) plus 4.5 percentage points, Oil Minister Rafael Ramirez said. Petroboscan will handle the money directly, and it will help boost daily output of oil.
"The loan has a very low rate because it's a corporate loan from Chevron to its joint venture and is tied to increased production," said Ramirez, who signed the credit along with Ali Moshiri, Chevron's head of Latin America, Middle East and Africa. "That way we obligate ourselves and our partner to focus on increasing production."
Currently, the Boscan field produces 107,000 barrels per day with the financing Ramirez projects the capability of 127,000 barrels per day by 2019. Ramirez even stated that both companies would like to boost production up to 150,000 barrels per day.
Venezuela is trying to tap more of the world's oil reserves and has been seeking financing from foreign partners. Earlier this month PDVSA reached an agreement with China for a $4 billion loan.
Ramirez said that PDSVA will be spending $15.4 billion on exploration and production in 2014. They'll seek additional loans and assistance from foreign partners.
Venezuela's greatest export is oil, where 95 percent of export earnings come from. With increasing food shortages and rising inflation, the country is in dire need of export income on oil. By getting more foreign investments, Venezuela will be able to invest more in social programs that they rely on oil income for.
After Venezuelan president Hugo Chavez gave the state majority ownership of oil projects, Chevron was the only company to stay in the country.
"We will continue to collaborate and cooperate with PdVSA because we believe the resources that are here in Venezuela are significant enough that we will be able to increase production not just in our current project but also in future projects," said Chevron's head of Latin America and Africa operations, Ali Moshiri, according to The Wall Street Journal.