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Venezuela's PDVSA inks oil deal with firm part-owned by Florida Republican

Reuters  |  CARACAS 

By Cohen and Brian Ellsworth

CARACAS (Reuters) - Venezuelan firm has signed a deal with little-known U.S. firm Erepla that is part-owned by a prominent Florida Republican to help increase the socialist-run country's plummeting crude output, the company said.

Erepla Services LLC, part-owned by Republican and which state records show was only registered two months ago, said it plans to invest up to $500 million to increase production at three Venezuelan fields in exchange for a portion of the crude produced.

The arrangement faces significant hurdles including obtaining an exemption from sanctions that block U.S. companies from providing financing to the government of or Venezuelan state firms.

It is a further sign that is tapping inexperienced firms to stem massive declines in crude output as more established oil companies steer clear of the troubled country due to concerns about U.S. sanctions and

Erepla said that the agreement will "revitalize oil production" at the Tia Juana Lago and fields in the western region and in the Ayacucho 5 bloc, in the eastern heavy-oil Orinoco Belt.

The company added that the deal gives it "enhanced managerial participation" in the projects and will be responsible for procurement, a key difference from long-established joint ventures between and like Chevron Corp, where has full operational control.

It said Erepla would be "responsible for the entirety of the investment." A declined to elaborate on how it would raise the funds.

Neither PDVSA nor the responded to a request for comment.

The Erepla confirmed that Sargeant, who has served as chairman of the and currently runs asphalt trading and shipping firm Global Oil Management Group, is a part-owner of Erepla.

The declined to say what size stake Sargeant has in the company.

The deal is the first new partnership between PDVSA and a private company since Oil in August announced a set of "joint service agreements" with 14 little-known companies that did not appear to have experience operating oilfields and PDVSA.

Those contracts were similar to ones rolled back under late Hugo Chavez, who expanded the state's role in the OPEC country's industry.

Output has continued to stagnate since the deals were signed, dropping to 1.46 million barrels per day in November from more than 2 million at the end of last year, according to OPEC figures, in a sign of the company's struggles under military rule.

COMPLYING WITH SANCTIONS

Washington has levied several rounds of sanctions on Venezuelan that block U.S. citizens from providing financing to without placing explicit restrictions on commerce or investment.

But because PDVSA is perennially cash-strapped, agreements to boost production usually involve partner companies putting up significant amounts of up-front funding that could run afoul of sanctions.

Erepla said it had applied to the U.S. Treasury Department's Office of Foreign Assets Control, which implements sanctions, for a "Specific License affirming the agreement." The Treasury Department, which is affected by the ongoing shutdown, did not immediately respond to a request for comment.

Consulted on how a company with no would be in a position to take on the project, the Erepla spokesman said the firm's "ownership includes serious and significant oilfield production capabilities as well as "

Maduro, who has deepened Venezuela's relationships with U.S. adversaries like and China, often accuses the of plotting to overthrow him and steal the OPEC nation's

The deal has been criticized by hardline Chavez supporters, who say it cedes too much control to a foreign company.

"This is the worst giveaway in the history of our country's oil industry," former Oil wrote in a blog post on Sunday. "Maduro and Quevedo will have to be held to account for giving away assets belonging to all Venezuelans and ceding our sovereignty over managing our oil."

(Additional reporting by and in Caracas; Editing by Susan Thomas)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 07 2019. 20:52 IST
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