Chavez advertises regional gas export group

Mar 12, 2007 01:00 AM

President Hugo Chavez is portraying Venezuela as a natural gas powerhouse and is pushing for a regional exporters' group despite a deficit of the fuel back home.
Chavez trumpeted plans for a South American gas producers and exporters group during a trip to Bolivia, which has the continent's second- largest gas reserves after Venezuela. Chavez continued his trip to Jamaica, where energy integration is on the agenda.

Venezuela is already urging Brazil, Bolivia and Argentina to help build a continental pipeline to connect Venezuelan and Bolivian reserves with markets in gas importing countries such as Brazil and Argentina. After two years of technical talks, the roughly $ 20 bn proposal remains in the initial planning phases.
Far from launching exports, Venezuela will begin importing gas from Colombia later this year to solve a supply crunch at its western oil fields. Venezuela needs more gas to inject into aging oil fields, a process that increases reservoir pressure and lifts oil production.

While Chavez paints Venezuela as a regional leader in gas, the vast majority of the country's reserves remain locked underground amid continued project delays. Venezuela is years behind schedule in developing the giant offshore Mariscal Sucre gas fields, and industry insiders say state firm Petroleos de Venezuela, or PdVSA, still hasn't secured a rig for the project.
Companies such as the US's Chevron and Norway's Statoil, which have recently found commercial gas reserves in the Deltana platform of Venezuela's Atlantic waters, face growing contract uncertainty ahead of expensive commercial drilling programs.

Earlier this year, Chavez included natural gas in a nationalization drive, saying the state should have control over these operations, as well as oil. Government officials have downplayed the comments, but industry observers say many companies will look to delay big investments until the outlook clears up.
Apart from the Deltana, Spain's Repsol-YPF and Brazil's Petrobras, among others, bought licenses to develop offshore gas fields near the Colombian maritime border in 2005. Oil service executives say many of these projects have seen little demand for drilling and related services, indicating caution by the operators who won the licenses.

Venezuela has already changed the rules on all of the country's existing oil contracts with outside companies, demanding operational control and at least a 60 % equity stakes. Many of these companies had already invested heavily over the past two decades and are largely ceding to Chavez's demands. But in the gas projects, firms have yet to begin expensive commercial drilling programs, making it less painful to delay or abandon them than in the oil industry.
"I don't think there are going to be any gas exports without foreign investment," said Miguel Octavio, an analyst at the Caracas-based BBO Servicios brokerage who follows the oil industry.

Octavio said some state firms with close ties to the Chavez government could begin commercial activities, but added that the western oil majors with the capital and expertise to get these projects off the ground faster remain cautious.
"It's like the great Pipeline of the South. It's been two years and nothing has happened," said Octavio.
Venezuela estimates its natural gas reserves at 167 tcf, the largest in South America.

Source: Dow Jones Newswires
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