Venezuela Signs Renegotiated ConocoPhillips Oil Exploration Contract

An oil deal potentially worth $10 billion that had been put on hold last month has been renegotiated and given a green light. The initial hold had made some investors nervous, but a meeting between Chavez and the CEO of ConocoPhillips has put the project back on track.

The joint venture between ConocoPhillips, PDVSA, Eni SpA, and OPIC Karimun aims to produce 120,000 barrels of oil per day by 2009
The joint venture between ConocoPhillips, PDVSA, Eni SpA, and OPIC Karimun aims to produce 120,000 barrels of oil per day by 2009.

Caracas, Venezuela. February 13, 2005 (— An oil deal that will involve $10 billion in investments over five years and that Venezuela had put on hold has been renegotiated. Four weeks ago the decision to put the agreement on hold had raised concern among investors that Venezuela might turn its back on multi-billion dollar investments. Venezuela’s Oil and Energy Minister, Rafael Ramirez, however, explained that the project had been put on hold because the Ministry rejected ConocoPhillips’ proposed business plan because of a $300 million discrepancy.

The agreement came about following meetings this week between Venezuela’s President Chavez, Minister Ramirez, and the presidents of Lukoil of Russia and of ConocoPhillips of the U.S. The project involves the Corocoro off-shore oil field that is estimated to have 18 billion barrels of oil and 100 trillion cubic feet of natural gas. In 2007 the field is to produce 75,000 barrels per day (bpd) and will produce 120,000 bpd by 2009.

ConocoPhillips’ president, James Mulva said, “We are very pleased with the advances we have achieved with our investments in Venezuela, such as those of Hamaca and Petrozuata and we are very enthusiastic about the prospects we have for the Corocoro field and the Deltana platform project.” The Deltana platform project is an offshore natural gas field, off of Venezuela’s eastern coast.

ConocoPhillips has been involved in Venezuela since 1996, when the first joint ventures were allowed since the nationalization of Venezuela’s oil industry in 1976.

The Petrozuata field belongs to the so-called Orinoco Oil Belt, which holds one of the world’s largest reserves of extra-heavy crude, estimated to be at 235 billion barrels. Venezuela produces about 500,000 barrels per day through strategic associations with transnational oil companies in the Orinoco Oil Belt. This oil belt will become increasingly important as Venezuela seeks to boost oil production from 3.1 million barrels per day to 5 million in the next four years.

Vaguit Alekperov, the president of Lukoil, said, “We are ready to realize large investments in exploration and production projects, in refining, the rehabilitation of oil wells, and the development of the Orinoco Oil Belt.”

Also last Friday, Venezuelan Vice-President José Vicente Rangel met with the CEO of the French oil company Total, which is interested in investing $5 billion in Venezuela’s Orinoco Oil Belt. Total is currently involved in the Sincor strategic association in the oil belt.