PdVSA delivers terms of Carabobo oil auction

Dec 03, 2009 01:00 AM

Venezuela has delivered the final terms for the auction of the Carabobo extra-heavy crude oil project in the country's Orinoco heavy oil belt, a government source said, after repeated delays to the expected bid.
The Carabobo project had been delayed since it was launched in 2008, amid declining oil prices and Venezuela's economic downturn. Therefore, government authorities agreed to soften the final conditions of the first tender of crude in more than a decade. Under the final terms, the government included a 10 % point reduction on royalties it had announced in September and the division into three parts of a premium to have access to the exploitation of reserves, which gives private companies more time to make the disbursement.

A Chevron executive has since called the Venezuelan government's new terms for its Carabobo heavy oil drilling tender an improvement, and said he thinks the revisions are most likely the final draft.
"It's encouraging that they've continued to improve the terms," Wes Lohec, Chevron's managing director for Latin America has said. "I don't think there will be any further changes in the terms. These are the terms with which we'll have to make our bid decision."

With the new and apparently final terms in their hands, oil companies now have until mid to late January to study them and then submit a bid. Each block could involve costs ranging from $ 10 bn to $ 20 bn, which could include construction of an upgrader to turn the tar-like crude into a more marketable, lighter oil.
Apart from Chevron, the other firms considering a bid include CNPC, BP and Total.

Being auctioned are a handful of heavy and extra-heavy oil blocks in the eastern Orinoco region, where vast, retrievable reserves are virtually guaranteed. Winning companies, or consortiums of two or more firms, would get a 40 % stake in each project, while PdVSA would reserve a majority 60 %.
The government is hoping the project will help boost Venezuela's oil production capacity over the coming years by at least 1.2 mm bpd.

The country's production capacity currently stands at about 3.2 mm bpd. In 2008, Venezuela was the world's 10th-largest oil producer and the largest in South America, according to the Energy Information Administration.
The Carabobo project would also provide a much-needed infusion of foreign investment into Venezuela, whose economy has fallen into a recession recently. A drop in oil prices from its 2008 record highs is partly to blame, as oil sales account for more than half of government revenue and about nine-tenths of exports.

Source / El Universal & Dow Jones
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