Identifier
Created
Classification
Origin
09CARACAS362
2009-03-23 16:52:00
CONFIDENTIAL
Embassy Caracas
Cable title:
VENEZUELA: OPIC-FINANCED COMPANY MAY FILE DEFAULT
how-toVZCZCXRO7371 RR RUEHDE RUEHDH DE RUEHCV #0362/01 0821652 ZNY CCCCC ZZH R 231652Z MAR 09 FM AMEMBASSY CARACAS TO RUEHC/SECSTATE WASHDC 2782 INFO RUEHHH/OPEC COLLECTIVE RUEHAC/AMEMBASSY ASUNCION 0976 RUEHBO/AMEMBASSY BOGOTA 7958 RUEHBR/AMEMBASSY BRASILIA 6117 RUEHLP/AMEMBASSY LA PAZ 2868 RUEHPE/AMEMBASSY LIMA 1150 RUEHSP/AMEMBASSY PORT OF SPAIN 3678 RUEHQT/AMEMBASSY QUITO 2964 RUEHSG/AMEMBASSY SANTIAGO 4095 RUEHDG/AMEMBASSY SANTO DOMINGO 0623 RHEHNSC/NSC WASHDC RHEHAAA/WHITEHOUSE WASHDC RHEBAAA/DEPT OF ENERGY RUCPDOC/DEPT OF COMMERCE RUEATRS/DEPT OF TREASURY RUMIAAA/HQ USSOUTHCOM MIAMI FL
C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000362
SIPDIS
ENERGY FOR CDAY AND ALOCKWOOD, DOE/EIA FOR MCLINE
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR RJARPE
COMMERCE FOR 4431/MAC/WH/JLAO
E.O. 12958: DECL: 01/29/2019
TAGS: EPET EINV ENRG ECON VE
SUBJECT: VENEZUELA: OPIC-FINANCED COMPANY MAY FILE DEFAULT
NOTICE AGAINST PDVSA
REF: A. CARACAS 288
B. CARACAS 282
C. CARACAS 239
D. CARACAS 214
E. CARACAS 136
Classified By: Economic Counselor Darnall Steuart, for reasons 1.4 (b)
and (d).
C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000362
SIPDIS
ENERGY FOR CDAY AND ALOCKWOOD, DOE/EIA FOR MCLINE
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR RJARPE
COMMERCE FOR 4431/MAC/WH/JLAO
E.O. 12958: DECL: 01/29/2019
TAGS: EPET EINV ENRG ECON VE
SUBJECT: VENEZUELA: OPIC-FINANCED COMPANY MAY FILE DEFAULT
NOTICE AGAINST PDVSA
REF: A. CARACAS 288
B. CARACAS 282
C. CARACAS 239
D. CARACAS 214
E. CARACAS 136
Classified By: Economic Counselor Darnall Steuart, for reasons 1.4 (b)
and (d).
1. (C) SUMMARY: U.S. concern Williams is poised to file one
to three default notices against PDVSA on projects financed
by OPIC. PDVSA's on-going financial crisis makes it unlikely
it will be able to pay arrears to Williams. Given recent
actions taken against other companies that have issued
default letters to PDVSA or sought to halt drilling or other
services for lack of payment, it is possible the GBRV could
move to nationalize these oilfield projects. END SUMMARY.
2. (C) On March 18, Econ Counselor and Petroleum AttachQ met
with Teresa Palacios (strictly protect throughout),Wilpro
Energy Services' Country Manager (NOTE: WilPro is a
subsidiary of Tulsa-based U.S. energy concern Williams).
Wilpro operates three projects in Venezuela with OPIC
financing. PDVSA owes Wilpro over $100 million. PDVSA
issued a token payment in Bolivars (per Palacios it was 8% of
the receivables due as of December 31, 2008) the week of
March 16. Palacios confided that Williams is likely to send
at least one (and possibly two or three) default letters to
PDVSA as early as the week of March 30 (following a Williams
Board of Directors meeting the week of March 23). PDVSA
would have 30 days to rectify the situation. The three
OPIC-financed projects are:
- Accroven: Has both OPIC and EXIM financing: This is a
natural gas liquids extraction and processing project located
in the Eastern Cryogenic Complex in Jose. It includes two
natural gas liquids extraction plants, a natural gas liquids
fractionation plant and associated storage and refrigeration
facilities.
- PIGAP II - OPIC and SACE (Italy) financing: This is a
high-pressure gas plant that injects between 1.2-1.4 billion
cubic feet of natural gas per day into PDVSA's Santa
Barbara-Pirital fields. This may be one of the largest
plants of its type in the world.
- El Furrial - 70% OPIC financing: This project injects gas
at high-pressure into the El Furrial reservoir for tertiary
oil recovery. This project supports production of some of
PDVSA's most valuable light crude.
3. (C) On March 19, EconOffs met with a local attorney who
provides legal services to Wilpro. She confirmed that, since
the PDVSA payments crisis began, other companies have filed
default letters to which PDVSA has not reacted. She observed
that if Williams sends the default letters, PDVSA could (1)
take corrective action (i.e., pay its arrears),(2) exercise
its contractual right to repurchase the plants from Williams
(each is valued in excess of $500 million),or (3) seize the
assets and force Williams to file for international
arbitration to seek compensation. The attorney observed that
Wilpro's three projects are in different states of financial
hardship and that only two of the three have contractual
clauses providing for international arbitration in New York.
She observed that Accroven is in the worst financial state.
4. (C) COMMENT: Williams' challenges in eastern Venezuela
mirror those of the Wood Group in western Venezuela (see
Reftels). If Williams' files default letters against PDVSA,
it is possible that the GBRV might move to nationalize the
CARACAS 00000362 002 OF 002
projects. Williams, however, has worked hard to maintain a
good working relationship with PDVSA. The company also has
prior experience in bringing a successful international
arbitration case against PDVSA (the 2003 SWEC case which
followed the nationalization of the loading terminal at the
Jose Industrial Complex during the December 2002-February
2003 oil strike). PDVSAQ,s ability to assume operation of
the water and gas injection services of the Wood Group and
Williams respectively is doubtful. The technology involved
in the Wilpro projects, however, is markedly more complex
than that used by the Wood Group and that would, we assume,
enter into any calculation to nationalize the plants. A take
over of these facilities would undoubtedly affect future oil
production.
CAULFIELD
SIPDIS
ENERGY FOR CDAY AND ALOCKWOOD, DOE/EIA FOR MCLINE
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR RJARPE
COMMERCE FOR 4431/MAC/WH/JLAO
E.O. 12958: DECL: 01/29/2019
TAGS: EPET EINV ENRG ECON VE
SUBJECT: VENEZUELA: OPIC-FINANCED COMPANY MAY FILE DEFAULT
NOTICE AGAINST PDVSA
REF: A. CARACAS 288
B. CARACAS 282
C. CARACAS 239
D. CARACAS 214
E. CARACAS 136
Classified By: Economic Counselor Darnall Steuart, for reasons 1.4 (b)
and (d).
1. (C) SUMMARY: U.S. concern Williams is poised to file one
to three default notices against PDVSA on projects financed
by OPIC. PDVSA's on-going financial crisis makes it unlikely
it will be able to pay arrears to Williams. Given recent
actions taken against other companies that have issued
default letters to PDVSA or sought to halt drilling or other
services for lack of payment, it is possible the GBRV could
move to nationalize these oilfield projects. END SUMMARY.
2. (C) On March 18, Econ Counselor and Petroleum AttachQ met
with Teresa Palacios (strictly protect throughout),Wilpro
Energy Services' Country Manager (NOTE: WilPro is a
subsidiary of Tulsa-based U.S. energy concern Williams).
Wilpro operates three projects in Venezuela with OPIC
financing. PDVSA owes Wilpro over $100 million. PDVSA
issued a token payment in Bolivars (per Palacios it was 8% of
the receivables due as of December 31, 2008) the week of
March 16. Palacios confided that Williams is likely to send
at least one (and possibly two or three) default letters to
PDVSA as early as the week of March 30 (following a Williams
Board of Directors meeting the week of March 23). PDVSA
would have 30 days to rectify the situation. The three
OPIC-financed projects are:
- Accroven: Has both OPIC and EXIM financing: This is a
natural gas liquids extraction and processing project located
in the Eastern Cryogenic Complex in Jose. It includes two
natural gas liquids extraction plants, a natural gas liquids
fractionation plant and associated storage and refrigeration
facilities.
- PIGAP II - OPIC and SACE (Italy) financing: This is a
high-pressure gas plant that injects between 1.2-1.4 billion
cubic feet of natural gas per day into PDVSA's Santa
Barbara-Pirital fields. This may be one of the largest
plants of its type in the world.
- El Furrial - 70% OPIC financing: This project injects gas
at high-pressure into the El Furrial reservoir for tertiary
oil recovery. This project supports production of some of
PDVSA's most valuable light crude.
3. (C) On March 19, EconOffs met with a local attorney who
provides legal services to Wilpro. She confirmed that, since
the PDVSA payments crisis began, other companies have filed
default letters to which PDVSA has not reacted. She observed
that if Williams sends the default letters, PDVSA could (1)
take corrective action (i.e., pay its arrears),(2) exercise
its contractual right to repurchase the plants from Williams
(each is valued in excess of $500 million),or (3) seize the
assets and force Williams to file for international
arbitration to seek compensation. The attorney observed that
Wilpro's three projects are in different states of financial
hardship and that only two of the three have contractual
clauses providing for international arbitration in New York.
She observed that Accroven is in the worst financial state.
4. (C) COMMENT: Williams' challenges in eastern Venezuela
mirror those of the Wood Group in western Venezuela (see
Reftels). If Williams' files default letters against PDVSA,
it is possible that the GBRV might move to nationalize the
CARACAS 00000362 002 OF 002
projects. Williams, however, has worked hard to maintain a
good working relationship with PDVSA. The company also has
prior experience in bringing a successful international
arbitration case against PDVSA (the 2003 SWEC case which
followed the nationalization of the loading terminal at the
Jose Industrial Complex during the December 2002-February
2003 oil strike). PDVSAQ,s ability to assume operation of
the water and gas injection services of the Wood Group and
Williams respectively is doubtful. The technology involved
in the Wilpro projects, however, is markedly more complex
than that used by the Wood Group and that would, we assume,
enter into any calculation to nationalize the plants. A take
over of these facilities would undoubtedly affect future oil
production.
CAULFIELD