Venezuela To Cut Oil Production Costs By 40%

Cost-cutting would include re-negotiating deals with contractors that were reached when oil prices were at record-high 2008 levels, he said.

Venezuela, one of the world's top oil producers, has seen the price of its oil plunge from more than 130 dollars a barrel in mid-2008 to $36.8 late last week.

The government planned for oil at $60 a barrel in its 2009 budget, officials said.

To make up for the dramatic downfall, Ramirez said in an interview with Radio Union that the state-owned oil concern Petroleos de Venezuela (PDVSA) would aim to cut production costs by 40 percent.

Some of the savings, he said, will be obtained by re-negotiating oil service contracts.

Debt payments to 91 percent of the company's 5 726 contractors began on Monday, Ramirez said.

However, he added that "there is a segment with which we must sit down to discuss" new terms. He did not specify which contractors would be asked to re-negotiate.

"I must defend the interests of the nation," he said, arguing that he could not pay, for example, for drilling services at last year's going rate.

Separately, Ramirez said that Venezuela will urge its fellow Opec members at the upcoming March 15 meeting in Vienna to cut back production in order to force prices up to $70 a barrel.

"There has to be an equilibrium between the price and the necessary investments" for crude production, Ramirez said.

The Organisation of the Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, announced in late 2008 output cuts of 4.2 million barrels per day in a bid to reverse tumbling prices.

Source: AFP

Author: Ksenia Kochneva