VENEZUELA: UPDATE ON TIDEWATER VESSELS AND

C O N F I D E N T I A L CARACAS 000707 SIPDIS ENERGY FOR CDAY AND ALOCKWOOD, DOE/EIA FOR MCLINE HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR RJARPE COMMERCE FOR 4332/MAC/WH/JLAO NSC FOR RKING E.O. 12958: DECL: 06/07/2019 TAGS: EPET EINV ENRG ECON VE SUBJECT: VENEZUELA: UPDATE ON TIDEWATER VESSELS AND POSSIBLE EXPROPRIATION Classified By: Economic Counselor Darnall Steuart, for reasons 1.4 (b) and (d). ¶1. (C) U.S. oil service firm Tidewater Senior Vice President Gerry Kehoe and Country Representative Mikael Jakobs (strictly protect throughout) on June 4 told Petroleum AttachQ (PetAtt) and visiting Washington energy analyst that Tidewater plans to send its two U.S.-flagged oil support vessels with U.S. crews out of Venezuelan waters as early as Tuesday, June 9. Thirty-two AmCit crewmembers are expected to arrive on June 8. Tidewater anticipates Chevron will conclude its contract for the boats on Monday, June 8 and that its agent will submit the export paperwork on the boats on June 9. (NOTE: The GBRV has instructed all Customs officials to secure PDVSA approval on any oil-sector equipment export requests submitted by expropriated oil services companies (including Tidewater) prior to releasing the equipment.) Chevron employed Tidewater's boats to support its exploration drilling program in the Cardon III Block in the Gulf of Venezuela that utilized the Liberian-flagged ENSCO-68 jack-up drilling rig. During a phone conversation with Jakobs on June 7, PetAtt learned that the schedule could slip to later in the week as Chevron is having difficulties transferring the rig to Spain's Repsol which has a follow-on contract for the Ensco rig to drill a well in the Cardon IV Block. (NOTE: Kehoe and Jakobs plan to keep Embassy PetAtt informed of the situation in case the GBRV obstructs removal of the two U.S.-flagged vessels. They will inform the Embassy of any GBRV actions prior to seeking Washington's assistance. END NOTE) ¶2. (C) During the June 4 meeting, Jakobs took a phone call from an unnamed PetroSucre manager who stated the PDVSA-led joint venture (with Italy's ENI and Taiwan's OPIC as minority partners) would pay 1.8 million Bolivars the week of June 8 for labor and support costs owed on the Tidewater contract. Jakobs told PetAtt one quarter of that sum would bring it current on labor costs and the rest would help Tidewater pay-off outstanding expenses to sub-contractors and suppliers. On June 7, Jakobs told PetAtt that PetroSucre management delivered a letter to Tidewater on June 5 requesting a three-month contract extension for the four non-U.S. flagged Tidewater oil support vessels currently servicing the Liberian-flagged ENSCO-69 drill rig in PetroSucre. Jakobs expects Tidewater will press to receive the outstanding $14 million owed on that contract as a pre-condition to extending it. He also acknowledged that it is likely given recent GBRV and PDVSA actions that the vessels could simply be seized by PDVSA. ¶3. (C) The regional manager for a large U.S. IOC told PetAtt on May 28 that he had heard there was a significant fire on ENSCO-69. Jakobs confirmed that a fire severely damaged ENSCO-69 and it has minimal electrical capacity. Jakobs believes that if Ensco assists PetroSucre in repairing the rig, it could be back on-line within a month. Without Ensco's assistance, it will take much longer to repair the drill rig. ¶4. (C) COMMENT: Washington should be prepared for the possible seizure of Tidewater's vessels in PetroSucre and to the GBRV erecting obstacles to the removal of the two U.S.-flagged vessels from Cardon III. END COMMENT. CAULFIELD