Venezuela Said to Allow Oil Joint Ventures to Manage Fund

Petroleos de Venezuela SA will allow joint ventures with China National Petroleum Corp. and Chevron Corp. (CVX) to manage $6 billion in loans designed to reverse oil output declines, said a PDVSA official.

The state-owned producer reached agreements on terms of a $2 billion credit from Chevron for the Petroboscan venture and a $4 billion loan from China Development Bank for Sinovensa, said the official who was briefed on the negotiations. The transactions probably will be signed by the end of June, said the person, who isn’t authorized to speak publicly.

PDVSA is allowing the joint ventures to handle the funds directly for oil infrastructure rather than being channeled through the state company or the government, said the official. PDVSA is also working on arrangements with oil service providers to pay as much as $2 billion in overdue payments and for new cash flow mechanisms.

Chevron spokesmen Kurt Glaubitz and James Craig didn’t respond to e-mails and telephone messages left today. An e-mail sent to CNPC after business hours wasn’t immediately answered.

Venezuela, which channels oil earnings into social programs and regional fuel subsidies, is depending on the ventures with foreign partners to tap more of the world’s largest oil reserves. Progress on the funding had been delayed by two presidential elections and the death of former President Hugo Chavez. Oil Minister Rafael Ramirez said May 15 that he would travel to China soon to sign the Sinovensa credit.

Output Target

PDVSA is in talks for similar funding with companies including Repsol SA (REP) and Royal Dutch Shell Plc (RDSA) as it targets output capacity of 3.5 million barrels a day by the end of 2014 from about 3 million at the end of 2013, the official said. PDVSA reported daily oil and natural gas liquids production of 3.03 million barrels last year from 3.13 million in 2011.

Repsol spokesman Kristian Rix didn’t respond to e-mails and phone messages left today seeking comment. Shell’s press department didn’t respond to phone messages and e-mails. A PDVSA press official, who isn’t an authorized spokesperson, said the company had no comment on the loans beyond those made by Ramirez on May 15.

The Venezuelan company has no plans to sell dollar debt this year, although the government may do so, said the official. The company is studying ways to refinance debt maturing in 2014-2017, the official said.

To contact the reporters on this story: Nathan Crooks in Caracas at ncrooks@bloomberg.net; Corina Pons in Caracas at crpons@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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