VENEZUELA: REPSOL EMPLOYEE COMMENTS ON DRILLING

C O N F I D E N T I A L CARACAS 001017 SIPDIS ENERGY FOR ALOCKWOOD AND LEINSTEIN, DOE/EIA FOR MCLINE HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR MKACZMAREK COMMERCE FOR 4332/MAC/WH/JLAO NSC FOR RKING E.O. 12958: DECL: 08/04/2019 TAGS: EPET EINV ENRG ECON CU VE SUBJECT: VENEZUELA: REPSOL EMPLOYEE COMMENTS ON DRILLING OFFSHORE CUBA/VENEZUELA REF: A. (A) 05 CARACAS 2807 ¶B. (B) CARACAS 239 ¶C. (C) CARACAS 853 Classified By: Economic Counselor Darnall Steuart, for reasons 1.4 (b) and (d). ¶1. (C) XXXXXXXXXXXXX , Repsol Drill Project Manager for the Rafael Urdaneta offshore natural gas exploratory well told Petroleum Attache on August 2 that Repsol had cancelled plans to drill in Cuba, as it had been unable to secure an offshore drill rig with less than fifteen percent U.S. content. ¶2. (C) XXXXXXXXXXXXX added that the Spanish oil company has experienced several challenges over the last month in its Urdaneta drill program. XXXXXXXXXXXXX shared that PDVSA recently seized vessels in the Gulf of Venezuela owned by Venezuelan launch company Terminales Maracaibo that had been servicing the off-shore rig. The service company has the contract to provide Chevron, Repsol, and Teikoku with launch services in the Gulf to transport crew and supplies to the rig. Terminales Maracaibo continued to operate vessels not expropriated in May 2009 until PDVSA recently expanded the scope of the expropriation beyond assets physically located on Lake Maracaibo. XXXXXXXXXXXXX indicated that Repsol has not been able to find a replacement launch company (as there are few private launch companies left in Venezuela) and is increasingly reliant on PDVSA to provide launch services to maintain its drilling program. ¶3. (C) XXXXXXXXXXXXX also noted that during the first week of drilling, the rig was shut down for 36 hours due to a shortage of diesel fuel. The rig temporarily shut down again the weekend of August 1 due to another fuel shortage. Problems within PDVSA's domestic fuel distribution system are driving this problem. (NOTE: The GBRV nationalized the downstream oil sector, including tanker trucks and gas stations in September 2008, and has slowly integrated private tanker trucks into its fleet.) XXXXXXXXXXXXX shared that Repsol had been unable to lease some specialized drill tools from Schlumberger as it had exported them out of Venezuela and was not willing to bring them back. XXXXXXXXXXXXX stated that Repsol had also encountered some technical difficulties with the drilling program (NFI). Based on current progress, XXXXXXXXXXXXX believes Repsol will complete its exploratory well within the next four to six weeks. ¶4. (C) XXXXXXXXXXXXX noted that Japan's Teikoku has offered jobs to Repsol's entire senior drilling team, asking them to transfer with the drill rig from Repsol. Teikoku has drill engineers preparing its exploratory well in the Moruy II block, but has not put into place a management team to execute the program (e.g. project supervisor, operations manager, drill rig supervisor, etc.). ¶5. (C) COMMENT: Repsol's problems in securing launch vessels and diesel fuel underscore some of the unintended consequences of GBRV nationalizations of downstream operations and the oil services sector. Its inability to secure specialized drill tools from Schlumberger confirms reports that companies are quietly removing capital equipment from Venezuela. END COMMENT. DUDDY