Venezuela’s PDVSA inks Deal with an Obscure US Oil Company Erepla to Boost Oil Production amid USA’s Sanctions on Country

Venezuela’s state oil company PDVSA has signed deal with American firm Erepla partly owned by a Florida Republican and oil billionaire Harry Sargeant III. The firm Erepla is a little known obscure firm deal comes in background of American sanctions against the socialist country which prohibits American companies to finance projects as well as to form partnership agreements in Venezuela. 

The stagnation in oil output continued from 2 million barrels per day in November to 1.46 million barrels per day according to OPEC figures which has indicated to country’s ongoing struggle to find viable and experienced partners to explore its oil fields under Nicolas Maduro’s military rule. The Oil Minister Manuel Quevedo in August 2018 announced joint agreements with 14 obscure companies with little experience in operating oilfields; however the PDVSA’s deal with Erepla makes it the first such agreement with a private firm.

The agreement is expected see many impediments on route to completion as it will have to gain an exemption from Trump Administration’s sanctions against the country. Venezuela is engaging with inexperienced companies established oil companies are looking to stay away from engaging with the military-ruled country and avoid angering those in the White House.

Erepla said in the agreement that the proposed collaboration will enhance oil production to renewed levels in Rosa Mediano fields, Ayacucho 5 Bloc and Tia Juana Lago. Erepla will be responsible for the entire $500 million investment and with full managerial participation. This is in contrast with the previous such agreements of PDVSA with Chevron, where it reserved complete operational control of the project. The Venezuelan state oil company PDVSA has a history of clashes with Sargeant. The company was compensated for $52 million after Sargeant owned company failed to pay for oil shipments between 2002 and 2003.

The investment is enormous as the PDVSA owing to the stagnant output in recent years is a cash-strapped. The deal invoked opposition from within Venezuela as the critics say that the deal cedes too much power to the foreign companies. After the country was at the receiving end of several rounds of US sanctions, Maduro has deepened his ties to USA’s strategic rivals like China and Russia. Maduro have several times publicly denounced and accused United States of plotting to overthrow him. The bitter state of diplomatic relationship between both the countries will be hurdle in the successful execution of the deal.

Erepla said that the company will apply to the US Treasury Department’s Office for Assets Control for a specific license exemption from the imposed sanctions.US Treasury Department said about the status of application that it doesn’t comment on timeline and review of individual applications.

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