Venezuela Drilling Tender Deadline Nears; May Be Pushed Back
July 23 2009 - 3:13PM
Dow Jones News
A Tuesday deadline for companies to submit bids in a tender for
Venezuela's Carabobo heavy crude blocks appears likely to be pushed
back, although no official postponement has been announced.
Officials at Petroleos de Venezuela, PdVSA, weren't available to
comment on whether the July 28 deadline for final bids, set in
April, still stands. But industry observers in Caracas say it has
probably been delayed amid a series of issues, not least of which
is less-enthusiastic interest by petroleum companies amid lower oil
prices, a weak global economy and Venezuela's tricky regulatory
environment.
Still, 19 oil companies met with Venezuela's oil minister
several months ago to discuss possible bids for the three blocks,
which are located along the Orinoco river belt, the richest piece
of oil real estate in the country.
The tender is the first major investment opportunity in
Venezuela for foreign oil firms in several years. The country's
outspoken president, Hugo Chavez, has been taking strong steps
against foreign oil firms in recent years, first unilaterally
changing contract terms and then nationalizing much of the industry
as he moves Venezuela toward what he calls 21st century
socialism.
But Chavez has also made it clear he is willing to take a
pragmatic approach toward socialism, and the new bidding round
suggests that he thinks a degree of foreign investment and
technology can keep production steady, boost revenue and allow him
to keep spending on programs for the poor.
"The level of Chavez's ideological rigor varies depending on the
price of oil and his needs," said Christopher Sabatini, senior
director of policy at the Council of the Americas in New York.
One problem with the Carabobo project seems to be that a cloud
of mistrust is hanging over it. PdVSA has been dragging its feet on
paying foreign firms for assets Chavez seized as part of the
nationalizations, and companies, though enticed by potential
profits from Carabobo, are uncertain about making deals with the
Venezuelan government.
As a result, analysts say foreign firms want any Carabobo
contracts to stipulate that both sides will accept international
arbitration to settle disputes that may emerge.
PdVSA has been reluctant, saying such arbitration would diminish
Venezuela's sovereignty. But observers say PdVSA has agreed to
similar clauses in other cases, including contracts it has inked
with Russia.
PdVSA officials weren't immediately available to confirm or deny
this. But a recent report in a local newspaper suggests PdVSA is
trying to reach a middle ground with foreign firms on the
arbitration question.
According to El Universal, Oil Minister and PdVSA chief Rafael
Ramirez said the company would allow for an arbitration clause on
certain parts of the contract, but what exactly it would cover
remains unclear. He said it would allow oil companies to get bank
loans, given that banks require the arbitration clause.
Among the firms considering bids for the Carabobo blocks are
France's Total SA (TOT) and state oil giant China National
Petroleum Corp., according to people familiar with the situation,
as well as Brazilian state-run energy giant Petrobras (PBR) and a
consortium of Russian oil and gas companies.
Also interested are Spain's Repsol YPF SA (REP) and Portugal's
Galp Energia SGPS SA (GALP.LB), and the local units of Royal Dutch
Shell (RDSA.LN), StatoilHydro (STO), BP Plc (BP) and Chevron Corp.
(CVX).
Companies selected would join PdVSA in two joint-venture
companies where foreign partners would own as much as a 40%
stake.
The Carabobo plan calls for each field to yield at least 200,000
barrels of oil a day that would be processed in two new upgrading
facilities planned for 2014. Ramirez has said he expects these
fields each to generate at least 100,000 barrels a day in a matter
of two years, several years before the upgraders come online.
-By Dan Molinski, Dow Jones Newswires; 58-414-120-5738;
dan.molinski@dowjones.com