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9 Aug, 2017 10:55

Russian oil major to stick with Venezuela despite crisis

Russian oil major to stick with Venezuela despite crisis

Russian oil company Rosneft has invested more money in Venezuela’s state-owned firm PDVSA, pledging to continue working in the country’s energy sector despite the worsening political and economic crisis.

The Venezuelan firm received $1.02 billion from Rosneft as an advance payment for future crude supplies, according to the statement released by the Russian company earlier this week.

Earlier this month, Rosneft CEO Igor Sechin said the company was going to increase cooperation with Venezuela.

“The country’s reserves of hydrocarbons are the world’s largest. From this perspective, any energy corporation must seek to work there,” he said.

Rosneft's pre-payments to PDVSA have amounted to nearly six billion dollars. This includes principal of $5.7 billion and interest of $245 million, Rosneft said, as quoted by Reuters.

“We expect the final repayment to be made in oil and oil product deliveries, which are ongoing strictly according to a schedule which we cannot provide to you. We expect full repayment before the end of 2019. No new pre-payments are planned,” the company told investors on a conference call.

Venezuela is Rosneft’s biggest source of crude outside Russia. The company holds a 49.9 percent stake in the US-based oil firm Citgo owned by Venezuela's PDVSA. The stake was offered as collateral when PDVSA obtained another loan of $1.5 billion from the Russian company last year.

Analysts say Venezuela is on the brink of default with inflation and GDP contraction greater than the worst forecasts. According to Fitch Ratings, the country’s currency reserves shrank seven percent since the beginning of the year through June. Last year the inflation rate reached 900 percent, while economic growth dropped 12 percent. The agency has lowered Venezuela’s credit rating to CCC that means a potential failure to service its debt.

Bets on a default are mounting due to the political turmoil that’s getting more and more complicated by a crude price crash and declining production.

Last month, Washington sanctioned Venezuelan President Nicolás Maduro and other senior Venezuelan officials after the election of a new legislative body to rewrite the country’s constitution.