Reserves, nationalizations became focal points in Carabobo tender - analyst

Friday, January 29, 2010

The sheer potential of Venezuela's oil reserves and the recent nationalizations across various sectors of the country's economy were the main issues that shaped the final offers received in the Carabobo tender for new heavy crude blocks in the Orinoco belt, Gianna Bern, president of US-based registered investment advisory firm Brookshire Advisory and Research, told BNamericas.

Venezuelan authorities received bids for three Carabobo projects from two consortiums, according to local and international press reports.

Spanish oil major Repsol (NYSE: REP) formed one of the consortiums with India's ONGC and Malaysia's Petronas, according to the reports. US oil major Chevron (NYSE: CVX) formed the second consortium with Venezuelan firm Suelopetrol and Japanese firms Mitsubishi, Jogmec and Inpex.

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"Participation by companies such as Chevron and Repsol is driven primarily by the massive Orinoco belt reserves. If the majors or other national oil companies can live with the required JV model and geopolitical risk, then Venezuela holds promise," Bern said.

Many majors and national oil companies, however, decided to sit the round out. Companies that had been in discussions with the oil and energy ministry (Menpet) and state oil company PDVSA about the tender included BP (NYSE: BP), China's CNPC, Italy's Eni (NYSE: ENI), Portugal's Galp, Brazil's Petrobras (NYSE: PBR), Royal Dutch Shell (NYSE: RDS-B), Norway's StatoilHydro (NYSE: STA), France's Total (NYSE: TOT) and a consortium of Russian firms.

"Companies that stayed on the sidelines are those that are concerned about the wave of nationalizations in Venezuela that have taken place across numerous sectors including energy," Bern said. "Contract sanctity is important in this industry. The nationalization of the oil field service sector, in particular, doesn't help Venezuela's bid rounds."

Investments resulting from the Carabobo tender were initially expected to reach up to US$30bn to produce 1.2Mb/d, PDVSA said last year. No further details on the actual bids were released by government officials or bidding firms.

Official results from the tender are due to be announced on February 10, according to press reports.

Besides creating JVs to operate seven new blocks, the round called for the construction of several heavy crude upgraders with capacities of around 200,000b/d.

Venezuelan officials have stated that the Carabobo tender would be the last for new blocks in the Orinoco.

An estimated 513Bb of heavy oil could technically be recovered from the Orinoco belt, the US Geological Survey (USGS) said earlier in the month. Venezuelan officials frequently calculate Orinoco reserves by the amount of physical oil on site, and some estimations put reserves over 1Tb.

The reserve base in the Orinoco is the largest ever assessed by the USGS.

"At the end of the day, increasing reserves and production is the end game. The Orinoco belt has P1 proven reserves north of 100Bboe and estimates of up to 500Bboe depending on whose numbers you follow," Bern continued.

"As PDVSA certifies these reserves, they become of increasing interest to the global oil community. However, continued nationalizations will keep players on the sidelines," she added.