Friday, February 06, 2009

When You Lie Down Do Business With Dogs. . . [Greg Pollowitz]

Shocking news out of Venezuela:

CARACAS, Venezuela — Venezuela's state oil company is behind on billions in payments to private oil contractors from Oklahoma to Belarus, some of which have now stopped work, even as President Hugo Chavez funnels more oil revenue to social programs.

Petroleos de Venezuela SA, or PDVSA, says unpaid invoices jumped 39 percent in the first nine months of last year—reaching $7.86 billion in September. And that was when world oil was selling for $100 a barrel.

With prices plummeting by more than half, PDVSA is trying to renegotiate some contracts. But analysts say hardball tactics to reduce charges from crucial service providers could backfire by lowering Venezuela's oil output. And foreign debt markets are reflecting jitters about Venezuela's finances.

Oil accounts for 94 percent of Venezuela's exports and funds nearly half the socialist government's budget, and Chavez uses it to bankroll an international aid bonanza, showering allies with cheap fuel, refining projects and cash donations.

But U.S. contractor Helmerich & Payne Inc. said last week that it has stopped drilling with two of its 11 oil rigs in Venezuela because of delayed payments. The Tulsa, Oklahoma, company says it will stop three more rigs by the end of February and the rest by the end of July if PDVSA doesn't begin to pay off a debt it puts at nearly $100 million.