PDVSA Gas operations located in Isla de Margarita

Venezuelan state oil firm PDVSA has signed an agreement with newly formed US-based energy company Erepla Services for help in improving the country’s declining crude production.

According to the agreement, Erepla is planning to invest up to $500m to help shore up output at three Venezuelan onshore oil fields, namely the Tia Juana Lago and Rosa Mediano in the western Lake Maracaibo region and in the Ayacucho 5 bloc, in the eastern heavy-oil Orinoco Belt, Reuters reported.

Created last year, Erepla will receive a portion of the crude produced from the fields in return for the investment.

According to Bloomberg, the contract requires the US firm to supply rigs and crews in the fields for a 25-year term, with an extension option for an additional 15 years.

The deal, however, requires Erepla to secure an exemption from the US Government sanctions that prevent firms in the country from providing financing to Venezuelan state-owned companies.

“We believe that the new model created in this agreement is in the national interest of the US and the interest of the Venezuelan people.”

The Bloomberg report stated that Erepla filed an application with the Treasury Department’s Office of Foreign Assets Control last November to seek an exemption to work in Venezuela.

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Erepla principal Harry Sargean was quoted by Bloomberg as saying: “We believe that the new model created in this agreement is in the national interest of the US and the interest of the Venezuelan people.”

He added that the company’s work ‘will be carried out in accordance with the economic sanctions enforced by the US Treasury Department, as well as other applicable US and Venezuelan’ laws.

Sargeant also warned that the absence of US involvement in Venezuela’s oil sector would allow Russia and China to gain access to Venezuelan oil reserves, the largest in the world.

Major oil companies are staying away from the South American nation to avoid facing penalties from the US Administration for potential sanction violations.