OREANDA-NEWS. State-owned PetroVietnam has notified Venezuela's government that it plans to withdraw from PetroMacareo, one of seven Orinoco upstream joint ventures created in 2010-12 by Venezuelan state-owned PdV, the energy ministry said late yesterday.

PdV and PetroVietnam are 60:40 partners in PetroMacareo, a \$4bn venture set up in 2010 to develop 200,000 b/d of Orinoco extra-heavy crude production in the oil belt's Junin 2 block.

PetroMacareo's development plan also includes construction of an associated 180,000 b/d upgrader to process the 8.5?API Orinoco extra-heavy crude into 32?API syncrude, of which 100,000 b/d would be exported to Vietnam's 145,000 b/d Dung Quat refinery and 80,000 b/d refined locally.

PetroMacareo was the first new Orinoco project to announce early production of about 500 b/d in September 2012, but production was shut down and on-site development was halted in 2013.

PdV chief executive Eulogio del Pino met with his counterpart at PetroVietnam Nguyen Quoc Khanh in January 2015 to discuss a plan to restart PetroMacareo with the aim of reaching 50,000 b/d by end-2016.

The energy ministry declined to comment on the reason for PetroVietnam?s withdrawal.

Local independent oil executives tell Argus the Vietnamese firm has become increasingly dissatisfied with the partnership.

PetroMacareo, like the other six new Orinoco projects, has been delayed from the start by shortages of skilled labor and basic construction materials, a lack of basic infrastructure in the remote area, and PdV's consistent failure to make its 60pc share of programmed investments, these executives say.

Galloping inflation, currency exchange instability and a worsening hard currency deficit have also made local operating conditions increasingly difficult.

In a bid to salvage PetroMacareo, a Venezuelan delegation went to Hanoi in mid-March to coax Vietnam's government and PetroVietnam to stay on board, a presidential palace official in Caracas tells Argus.

But Prime Minister Nguyen Tan Dung told the Venezuelans at a 12 March meeting that "Vietnam's investment in Venezuela is in trouble, especially in the oil and gas sector," according to a statement posted on PetroVietnam's website.

The head of the delegation, Elias Jaua, said the government is committed to improving investment conditions and ensuring financing for PetroMacareo's development, the palace official said.

"President (Nicolas) Maduro views Vietnam as an important strategic partner in Venezuela's energy and agriculture development, and has ordered PdV and the energy ministry to resolve PetroVietnam's concerns quickly," the official added.

Vietnam's prime minister responded cautiously, saying the Vietnamese government hopes Caracas will take "appropriate supportive measures (and) create favorable conditions for the success" of PetroMacareo.

PetroVietnam is required contractually to obtain PdV's prior approval before it can sell its 40pc PetroMacareo stake to another oil company. PdV has first option to acquire the stake, but is unlikely to do so because it lacks the cash to proceed with the development on its own.

PetroVietnam would become the third foreign oil company to abandon an Orinoco upstream joint venture since 2013.

Malaysia's state-owned Petronas exited 400,000 b/d PetroCarabobo in the Carabobo 1 block in 2013, transferring its 11pc stake to PdV, which now holds 71pc of the \$20bn project.

PetroCarabobo's other minority shareholders include lead operator Spain?s Repsol and India's ONGC with 11pc each. Oil India and India Oil hold a combined 7pc.

Russia?s Lukoil also suspended operations in Venezuela last year, selling its 8pc stake in 450,000 b/d PetroMiranda to state-owned Rosneft, which now owns 32pc of the upstream joint venture developing the Junin 6 block.

PdV holds 60pc of PetroMiranda, and Russian state-controlled Gazprom holds 8pc.