Venezuela is back in the news again with President Nicolas Maduro, who has decided to link Petro with their national currency, announcing that a total of seven oil fields present in the country will be given to almost 14 companies to increase oil output.
Reports have shown that fluctuations in the oil spectrum of a country so affected by hyperinflation will result in a massive shift in their new currency, the Sovereign Bolivar. The newly adopted Petro Dollar first came into the limelight in December 2017 when the Venezuelan government released a whitepaper on it, with plans to link the NEM based cryptocurrency to oil barrels to uplift the already crumbling economy.
Maduro’s latest efforts is also a reversal of former Venezuelan President Hugo Chavez’s strict policies that curbed private oil sales in the country. The firms that are involved in the new governmental partnerships are Italy’s Eni, Total based in France and five Venezuelan companies: Petrokariña, Enfriadores de Venezuela C.A., Consorcio Rinoca Centauro Kariña, Well Services Cavallino, and Consorcio Petrolero Tomoporo.
Till now, the state’s oil reserves were controlled by the infamous PDVSA, Venezuela’s own petroleum organization. Some reports have also suggested that the reason why the community has given up on the organization is because of the rampant complaints of insider trading and involvement of state officials with nefarious activities. The same PDVSA has now come to the forefront by taking charge of the new companies involved in the partnership by:
- Giving the companies a 6-year quota to boost sales and production
- Asking them to establish contracts to increase output and ensure proper payments
Manuel Quevedo, the President of PDVSA said:
“During the 28th August event the overall plan for the new tie ups was calculated to be around $430 million in investment and a production increase of 641,000 barrels per day (bpd). The terms of the deals will be revealed later.”
The new tie-ups come in the wake of recent reports that showed that there were some glaring loopholes in the establishment of Petro in Venezuela. The initial affidavit on Petro stated that the cryptocurrency would be linked to oil barrels but later investigations revealed that there was a severe lack of investments, amounting to almost $20 billion. An on-ground survey conducted by Reuters stated that:
“None would identify themselves. One complained of being “scammed.” Another told Reuters he had received his tokens without a problem; he blamed U.S. sanctions against Venezuela and “awful press” for hurting the petro’s debut.”
The new oil tie-ups are set to shake up the allocated 5 billion barrels of oil that are used to give value to Petro. Experts believe that it will still be some time before Petro can come to the forefront as a tradeable currency.
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