Venezuela began inviting foreign energy companies to bid in the country's biggest-ever auction, offering partnerships in a pair of joint ventures that will pump a million barrels a day from the Orinoco Belt.
Winning bidders will become minority partners with Petroleos de Venezuela SA, the state oil company known as PDVSA, to produce, process and sell oil from areas known as Carabobo, Energy and Oil Minister Rafael Ramirez said today at a ceremony attended by representatives of 47 oil companies in Caracas.
Chevron Corp., Royal Dutch Shell Plc and Total SA stayed in Venezuela through tax and royalty increases and nationalizations of joint ventures by President Hugo Chavez in hopes of developing Orinoco oil. ``The international companies aren't replacing reserves,'' Carlos Rossi, a Caracas-based petroleum economist, said. ``If they can get access to the Orinoco Belt and put that on their books, they can have a much higher share value.''
The areas included in the auction have 61.9 billion barrels of oil in place, Ramirez said. Venezuela is requiring consortiums to plan on recovering at least 20 percent of that, or 12.5 billion barrels. The areas comprise about 1 percent of the oil reserves in the world. ``I think it will be successful,'' Wes Lohec, president of Chevron's Venezuela unit, said after Ramirez's presentation. ``It's very exciting. It's a good step.''
Others that may take part include state-controlled oil companies such as China National Petroleum Corp., Ecopetrol SA and Petroleo Brasileiro along with public companies such as BP Plc and StatoilHydro ASA, Ramirez said.
Company Hesitancy
Companies may hesitate to bid because of Chavez's history of changing contract terms, said Philip Weiss, an oil and gas analyst at Argus Research who covers companies including Exxon, Royal Dutch Shell Plc and Chevron Corp. Investors won't be able to take the reserves at face value, he said.
``When looking at those reserves, I'd want to make an allocation against them because of the uncertainty,'' he said in a telephone interview. As an investment location, he said, while Venezuela beats out ``impossible'' countries like Saudi Arabia, ``it would be very, very low on my list. I don't know how you get assurances in a situation like that.''
Under Venezuelan law, winning companies will own as much as 40 percent of the new projects. They will have to share proprietary technology and pay royalties and taxes that consume at least 85 percent of their income. New contracts in Venezuela forbid international arbitration for disputes. PDVSA, which invests more in social programs than oilfields, will operate the projects and employ the laborers.
Changing Terms
The chance of changing terms over the life of the projects is another concern. Chavez has boosted royalties and taxes and unilaterally changed the terms of joint ventures with about 50 private oil companies, most of which stuck with their projects.
Chavez last year forced private partners to cede control over joint ventures in the Orinoco that produce about 600,000 barrels a day. Exxon Mobil Corp. and ConocoPhillips left the country and filed for arbitration. Companies with arbitration cases against Venezuela are banned from the new bidding process.
Winning companies will build special refineries, known as upgraders, to process the thick crude found in the region into free-flowing synthetic crude that can be exported to conventional refineries.
The country's most advanced upgrader, the Sincor project built by Total and StatoilHydro ASA, cost $4.2 billion, according to a 2003 briefing by Total. While steel prices have soared since then, prices may now come down again as oil development slows amid lower prices and limited financing, said Asdrubal Chavez, vice president of refining at PDVSA.
Ramirez said the two new projects have to produce 400,000 barrels a day of oil at least as clean and light as Sincor's. In addition, each of the joint ventures will be able to pump 100,000 barrels a day of tar-like crude that will be mixed with lighter grades, rather than refined, before being exported. Production cost will be about $4 a barrel, Ramirez said.
No comments:
Post a Comment