Eni Inks Deal to Develop Venezuela's Junin 5 Oil Field, Aims to Recover $2.3 Billion Debt

Italian energy company Eni has signed a new agreement with Venezuela's state-owned oil group PDVSA to develop the giant Junin 5 heavy oil project, a move that significantly improves its prospects for recovering over $2.3 billion in outstanding debt from the country.

The Junin 5 Agreement

The deal, signed on Wednesday, converts Eni's existing stake in the Orinoco Belt project into a 25-year production-sharing agreement, with Eni taking on the role of field operator. According to a report by Reuters, the agreement marks a key step in U.S.-backed efforts to revive Venezuela's struggling oil industry.

Key details of the project include:

• Annual Investment: Eni and PDVSA plan to invest approximately $1.5 billion per year.
• Production Target: Output is projected to increase from the current 12,000 barrels per day (bpd) to 400,000 bpd by 2030.

Following the signing, Eni Chief Executive Claudio Descalzi stated that work would begin immediately, telling reporters, "We will begin drilling the first well tomorrow."

A Strategy to Recover Debt

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After nearly three decades of operations in Venezuela, Eni's decision to deepen its commitment comes as it faces a large accumulation of receivables from PDVSA. The new deal is seen by analysts as a strategic choice to remain engaged in the country's oil sector revival, thereby creating a pathway to recoup its claims.

"The deal will provide further opportunities for value creation for the country and for the gradual recovery of outstanding receivables," an Eni spokeswoman told Reuters. This sentiment was echoed in an analysis by Barclays, which stated, "We see the deal as an opportunity to unlock future production and recover existing receivables."

Broader Venezuelan Operations

Beyond the $2.3 billion in direct debt, Venezuela also owes an additional $400 million to a natural gas joint venture at the Perla field, which Eni co-owns with Spain's Repsol. Eni has continued to operate the offshore Perla project, which primarily supplies the domestic market, despite U.S. sanctions halting payments.

Davide Tabarelli, head of energy consultancy Nomisma Energia, noted that Eni's persistence is now paying off. "Projects that risked becoming stranded assets can now make a contribution to the group and help support its production growth," he said. According to industry sources cited by Reuters, Eni's current production of about 64,000 barrels of oil equivalent per day (boepd) in Venezuela could eventually rise to 1 million boepd.