- Schlumberger expands in Venezuela even as it cuts global staff
- Petrobras debt, corruption scandal slows drilling activity
Cutbacks by Brazil’s state oil company has one of its main suppliers exporting local talent to an unlikely location: Venezuela.
Schlumberger Ltd. is increasing activity in the neighboring country even as it continues to trim its global workforce in response to weakening demand for its goods and services elsewhere, according to a person familiar with the moves who asked not to be named because the policy isn’t public. The world’s largest oilfield-services provider is also sending some Brazilian nationals to Saudi Arabia and Kuwait after Petroleo Brasileiro SA cut spending in an effort to reduce the biggest debt load in the oil industry, the person said.
The staffing shifts underscore Brazil’s decline as a destination for the oil industry. Companies including Schlumberger, Halliburton Co. and Baker Hughes Inc. invested heavily after tens of billions of barrels of crude oil were discovered in deep waters off the nation’s shores. The relocations also tell the story of Schlumberger’s commitment to Venezuela, home to the world’s largest oil reserves and a challenging place for energy companies to do business. While Baker Hughes and others have reduced activity in Venezuela amid unpaid bills, currency losses and rising crime, Schlumberger has stayed put.
Schlumberger declined to comment on personnel transfers in an e-mailed response.
The number of active rigs in Venezuela has rebounded in recent months to the most in a year, while activity has declined in Brazil, where Petrobras has reduced exploration work and continues to renegotiate contracts with suppliers.
“Steady” activity in Venezuela during the third quarter helped offset falling revenue in Brazil, Mexico, Argentina and Colombia, Schlumberger Chief Executive Officer Paal Kibsgaard said on an Oct. 16 conference call. While Petrobras is the only major client in Brazil, Schlumberger has more customers in Venezuela, where international majors including Statoil ASA and Chevron Corp. and national oil companies from China, Russia and India are partners with state-owned Petroleos de Venezuela SA, or PDVSA.
As recently as 2010, Brazil was predicting annual oil production gains of 9 percent, and the government called for more shipyards, factories and research centers to provide the equipment and brain power to tap deposits miles beneath the seabed.
It didn’t work out that way. Production growth has been modest, and Petrobras missed the biggest benefits of the commodities boom because it had to subsidize fuel imports at the request of the government. Unlike other international oil companies that built cash hoards when oil was trading above $100 a barrel, Petrobras tripled its debt. To make matters worse, a group of executives from Petrobras and some of Brazil’s largest builders have been jailed in a massive pay-to-play scheme that has paralyzed parts of the supply chain.
Brazil is expected to loosen regulations in the oil industry on contracting goods and services after current restrictions damped demand during a recent licensing round, an industry group said.
The proposed changes, which are under study by the Energy Ministry and still need to be signed by president Dilma Rousseff, could ease limits on foreign-built oil equipment to reduce development bottlenecks. That would make Brazilian projects more competitive amid low oil prices, said Jorge Camargo, the head of the Brazilian Petroleum Institute, a lobby known as IBP.