Page 5 - LatAmOil Week 42 2019

LatAmOil COMMENTARY LatAmOil
 eir argument is that if the NOC’s bondholders exercise their right to seize collateral, they will e ectively dismember Citgo, in which case Ros- ne might seize the other 49.9% of shares in the PdVSA subsidiary, thereby gaining a blocking stake in a company that accounts for perhaps 5% of the US’ total re ning capacity.
Rosneft and the Kremlin have dismissed such speculation, saying that Russian interests have no intention of taking such action with respect to Citgo. Nevertheless, speculation about the PdVSA subsidiary’s fate has been rampant.
Paying up
Guaido’s camp has sought to quell rumours of Citgo’s demise, and a representative of creditors with collateral rights over the company’s shares told the Wall Street Journal earlier this week that he believed that the Venezuelan opposition had access to enough cash to pay bondholders $913mn on October 28 on its own. (If so, that would certainly strengthen Guaido’s politi- cal standing – and bolster his claim to control over PdVSA, which has e ectively remained in Maduro’s hands thus far.)
But other observers anticipate that the oppo- sition is unlikely to take such action. Bloomberg reported on October 22, for instance, that repre- sentatives of the interim president were saying in talks with US o cials that they could not cover obligations to PdVSA bondholders.
If so, Citgo’s fate is still e ectively in Maduro’s hands. But Guaido does have another option, and he is doing his best to ensure that he can exercise it.
Next steps
As noted above, PdVSA is one of the targets of the US sanctions regime. at is, Washington has, in most cases, asserted its right to impose penalties on entities doing business with the Venezuelan NOC.
But it has also issued some exemptions, such as the waiver awarded to US major Chevron (and extended for another 90 days on October 21). One of these exemptions, known as Gen- eral Licence 5, permits holders of PdVSA’s 2020 bonds to exercise their rights – including, the- oretically, the right to demand collateral in the event of a default.
Guaido and his supporters are now asking Washington to change tack by issuing an asset protection order, which would e ectively sus- pend General Licence 5 by allowing PdVSA not to settle any of its nancial obligations in the US. Doing so would ensure that Citgo does not col- lapse in the event of a default – or lose access to the funds that the Venezuelan opposition wants to use to keep itself a oat.
It is still not clear what might happen next. As of press time, neither the US government nor the Venezuelan opposition has said what they intend to do, and talks are ongoing. It seems likely, though, that US President Don- ald Trump’s desire to see Maduro ousted will win out in Washington. That is, US authori- ties are likely to decide before October 28 that they would rather revoke General Licence 5 and bolster Guaido’s position, even if it means transgressing free-market principles such as minimising interference in nancial markets.™
aido is “
now asking Washington to change tack by issuing an asset protection order for Citgo
ARGENTINA
Argentina awards exploration licence for block in West Malvinas Basin
Gu
ARGENTINA’S government said last week that it had awarded an exploration licence for an o shore block in the West Malvinas Basin, to a consortium formed by Argentinian, Italian and Japanese companies.
In a resolution published in the official gazette, the South American country’s Secre- tariat of Energy said that the licence covered MLO/124, a 4,418-square km block that lies in waters averaging 1,500 metres deep. e licence authorises the consortium to carry out explora- tion work over a period of eight years, with the option of a ve-year extension.
It also states that the group will be entitled to a development licence for the block in the event that it discovers commercially viable hydro- carbon reserves. Additionally, it stipulates that this development licence would permit them to claim 100% of production from the licence area.
O cials in Buenos Aires have not revealed how much the consortium intends to spend on
the project or when it might begin work. ey did, however, name the members of the group as Tecpetrol, a company based in Argentina; MEMPLO, a subsidiary of Japan’s Mitsui, and Eni Argentina Exploración y Explotación, an a liate of Italy’s Eni.
According to the resolution, the licence award is in line with the campaign that the Energy Secretariat initiated last year to draw investors’ attention to the South American country’s o shore zone. “ e Argentinian conti- nental shelf and the di erent basins are underex- plored, which is lacking for their development,” the document said.
The Secretariat of Energy began offering exploration deals for blocks in the West Mal- vinas Basin earlier this year. It said in April that it had awarded licences for the MLO/113, MLO/117 and MLO/118 blocks to a consor- tium formed by ExxonMobil (US) and Qatar Petroleum.
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