Oil executives rush to complete contract migration in Venezuela, sources say

By Marianna Parraga and Deisy Buitrago

CARACAS, ‌July 23 (Reuters) - Venezuela's oil ​ministry has ​told partners of state energy company PDVSA that it will maintain the July 28 deadline it had set to migrate oil and gas contracts to a new legal framework approved ‌in January, rushing executives to complete the negotiation of terms, four sources close to the ⁠talks said.

Venezuela's National Assembly in late January approved a sweeping reform of the hydrocarbons law, the backbone of the country's energy industry, ‌offering autonomy for companies to operate ‌oil and gas projects and introducing a new taxation model. The oil ministry gave up to 6 months to adjust all existing contracts to the new framework.

The migration involves about two dozen foreign and local ​companies, including U.S. oil major Chevron, Spain's Repsol and Italy's Eni, most of which have more than one project in partnership or under contract with PDVSA.

The negotiations have accelerated in recent days with foreign ⁠executives arriving in Caracas to negotiate the long list of documents required to sign, following twin earthquakes last month that caused delays and took ​the country's main airport out of service, the sources said.

Most meetings for the contract talks are taking place in hotels in Caracas as PDVSA has not yet instructed ​staff to resume work from its headquarters, which suffered damages from ‌the quakes, the people added.

The oil ministry, PDVSA, Chevron, Repsol and Eni did not immediately reply to requests for comment.

LAYERS OF COMPLEXITY

A weighted royalty rate from a newly ⁠introduced hydrocarbon tax has become the most important element of the core contracts in negotiation, with official estimates not matching some of the companies' calculations, the sources said.

Most companies have delivered all documents initially required, but it is unclear if some ⁠contracts and joint ventures will be ultimately revoked. The ministry might allow companies to submit some annexes to the main contract ​in a later date, including recently requested plans for each energy project to generate its own electricity, according to the sources.

Some of PDVSA's largest partners negotiating project expansions, including Chevron, have shown progress in recent months by having key permits approved ‌by the ministry, according to documents published in the official gazette.

Companies getting into Venezuela for the first time - mostly foreign wildcatters and little-known firms - do not have a ‌specific deadline to negotiate and agree to contract terms following preliminary agreements signed since early this year, the sources added.

Those ⁠firms include units of U.S. Crossover Energy ‌and Hunt Oil among many others. ​The preliminary agreements are non-binding.

(Reporting by Marianna Parraga in Houston and Deisy Buitrago in Caracas; additional reporting by Sheila Dang and Francesca Landini. Editing by Daina Salomon, Chizu Nomiyama and ‌Nick Zieminski)

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