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Chevron and Repsol will lead development of Orinoco tar sands

Saturday, February 13th 2010 - 07:30 UTC
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Oil Minister Rafael Ramirez Oil Minister Rafael Ramirez

Chevron and Repsol YPF SA will lead development of two 15 billion US dollars projects to pump and refine Venezuelan crude after winning the country’s first oil auction since President Hugo Chavez took office 11 years ago.

Chevron, Mitsubishi Corp., Inpex Corp. and Suelopetrol CA will take a combined 40% stake in the Orinoco tar sands Carabobo 3 area, Oil Minister Rafael Ramirez said in Caracas. State-run Petroleos de Venezuela SA, or PDVSA, will hold 60%. Output is scheduled to start in 2013 and rise to 400,000 barrels a day in 2016, Ramirez said.

The Carabobo projects, along with similar ventures with Eni SpA, PetroVietnam and a group of Russian companies in the neighboring Junin field, are central to Venezuelan plans to boost oil output. The foreign companies get the opportunity to stake a claim to one of the world’s biggest oil deposits.

“Foreign oil investment is absolutely necessary to develop our reserves,” Chavez told company executives in a ceremony at the presidential palace. “We can’t do it alone.” He said the US Geologic Survey found the Orinoco Belt has more than 500 billion barrels of recoverable crude.

Repsol, Petroliam Nasional Bhd., Indian Oil Corp. and Oil India Ltd. will develop the second project called Carabobo 1 with PDVSA to pump 480,000 barrels a day, Ramirez said. An area called Carabobo 2 wasn’t assigned.

Of the 52 companies that Venezuela invited to bid, 19 paid for field data. The two winning teams were the only publicly announced bidders.

The Repsol venture must pay 200 million of a 1.05 billion USD signing fee within 10 days of the incorporation, Baldo Sanso, the oil ministry consultant who coordinated the bid process, said in an interview. The Chevron-led group will pay 100 million of its 500 million USD signing fee at that time, he said. Besides each group will loan PDVSA at least one billion USD to get the projects started, Sanso said.

Repsol, ONGC of New Delhi and Petronas of Kuala Lumpur will each hold 11% of the joint venture while Indian Oil and Oil India will split a 7% stake, Nemesio Fernandez-Cuesta, Repsol’s executive vice president for exploration and production, told reporters.

Ramirez said the Carabobo and Junin projects will boost Venezuela’s oil output to 6 million barrels a day by 2016 from about 3 million barrels a day at present.

The ventures will each spend 6 billion to 8 billion USD on specialized refineries to convert the area’s tar-like crude into lighter oil for export, Eulogio del Pino, PDVSA vice president of exploration and production, said yesterday in an interview.

The ventures will pay for later phases by selling oil starting in 2013, bidding coordinator Sanso said. They will pump heavy oil and mix it with lighter grades to make it acceptable for export, funding later development.

Deutsche Bank AG is advising ONGC Videsh Ltd., the overseas unit of India’s biggest oil explorer, along with Indian Oil and Oil India, said Cathy Knezevic, a Hong Kong-based spokeswoman at the German bank.

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