Exxon signs PDVSA deal to explore return to Venezuela

ExxonMobil Exxon Mobil Corporation ↘ 0.16% said on Monday, November 9, that it had signed a non-binding memorandum of understanding with Venezuela's state oil company PDVSA to explore possible upstream oil opportunities, according to Reuters. The agreement could lead to the company's return to Venezuela nearly two decades after its assets there were expropriated. It does not commit Exxon to any specific project, Offshore Engineer reported, carrying Reuters copy.reuters.com+1

"This memorandum is a meaningful first step, but any future investment would require stable policies, clear regulations, strong investment protections and competitive returns," Exxon said in a statement quoted by Reuters and The New York Times. Exxon did not say which projects or oil areas it was looking at. It would still need a final joint-venture or production-sharing contract before it could take part in exploration or production.oedigital.com+2

A turnaround from "uninvestable"

The deal is a sharp change from January, when CEO Darren Woods called Venezuela "uninvestable" at a White House meeting held days after U.S. forces captured Nicolás Maduro. "We've had our assets seized there twice," he said at the time, the Times reported. Since then, Venezuela has rewritten its oil laws. Oil prices have also risen about 50%, largely because of the war with Iran, which has raised the value of supply located far from choke points like the Strait of Hormuz, according to the Times. Woods was still cautious on the third-quarter earnings call last month. He said progress was being made on fiscal and legal terms, "but there's a way to go".nytimes.com+1

Caracas welcomes the return

"Today is a very important signing," interim President Delcy Rodríguez said in a televised broadcast. She said the agreement reflected months of negotiations aimed at Exxon's effective return to hydrocarbon operations, DW reported. She also said Exxon would invest under favorable conditions and within a framework of legal certainty. Exxon President Dan Ammann said the company's capabilities, combined with the country's resources, would "bring significant benefits to all parties involved".dw.com+1

The deal is also a political win for President Donald Trump, who has pushed U.S. oil companies to invest in Venezuela. Exxon's rival Chevron ↗ 0.21% signed a deal in September to spend $7 billion in the country over five years, Seeking Alpha reported.seekingalpha.com+1

Unfinished business

Before the expropriation, Exxon owned 41.67% of the Cerro Negro heavy crude project, now called Petromonagas, and half of the La Ceiba project. In 2014, a World Bank arbitration body (ICSID) awarded Exxon $1.6 billion plus interest. Venezuela has challenged that award, and the dispute is still unresolved. Exxon also has reason to improve relations with Caracas because of its large operations in neighboring Guyana. Its future there has been clouded by Venezuela's territorial claim, and talks on the maritime border are expected after a United Nations court rules on the land border, the Times noted.oedigital.com+1