Venezuela auctions off two major oil projects

Venezuela auctioned off two major projects in the oil-rich Orinoco Belt on Wednesday night to international oil companies, requiring investments of up to $30bn.

Although three projects were tendered in the Orinoco’s Carabobo block over a year ago, only two were assigned – Carabobo 1 to a consortium including Spain’s Repsol, and Carabobo 3 to a consortium including the US’s Chevron.

“We have put the Orinoco Belt at the world’s disposal,” said President Hugo Chavez, who claims that it is the largest oil field in the world, with around 270bn barrels of recoverable reserves.

“We need international investment. Alone we would not be able to develop these reserves,” he said, highlighting that Venezuela would nevertheless maintain control of the reserves.

PDVSA, Venezuela’s state oil company, will keep a 60 per cent stake in both projects, which will require investments of around $15bn each and have the capacity to produce at least 400,000 barrels per day (bpd) each. Mr Chavez said that existing projects in the Orinoco Belt are producing up to 600,000 bpd.

Repsol will have an 11 per cent stake in its project, the same as consortium partners Petronas of Malaysia and ONGC of India, with two other Indian companies taking the remaining 7 per cent, according to a Repsol statement.

Chevron teamed up with three Japanese companies – Mitsubishi, Jogmec, and Inpex – and Venezuela’s Suelopetrol.

The consortium that was assigned Carabobo 1 will pay the government a signing bonus of $500m, while the consortium developing Carabobo 3, considered to be more promising, is to pay $1.05bn. Both groups will pay an extra $1bn to PDVSA in financing.

Venezuela’s energy minister, Rafael Ramirez, said that the projects – which require the construction of complex and expensive “upgraders” to refine the extra heavy oil found in the Orinoco – could be fully operational by 2016, although early production could begin by 2013. The projects are expected to have a life span of 25 to 40 years.