Auction of Venezuela's vast Carabobo oil field- factbox

CARACAS
Petroleumworld.com, Feb 04, 2010

Venezuela last week received bids for all three projects in the Orinoco heavy oil belt's Carabobo bidding round, with major oil companies Chevron (CVX.N) and Repsol (REP.MC) among the bidders.

The auction presents global oil giants with a major opportunity to gain access to huge reserves of crude, but includes a range of risks related to financing, infrastructure and complex operations.

Following are some details about the Carabobo field:

BLOCKS AND RESERVES

The auction consists of seven blocks organized into three projects with similar surface areas and reserves. The total area under auction contains 127.9 billion barrels of oil in place, certified by Canadian firm Ryder Scott. The government calculates that 25.6 billion barrels are recoverable.

BIDDING

On Jan. 28, two consortia that include eight companies made offers for the three blocks, sources close to the process told Reuters. One consortium is made up of Chevron, a group of Japanese companies and Venezuela's Suelopetrol; the other includes Repsol, Petronas (PETR.KL) and ONGC (ONGC.BO), the sources said.

In November 2008, 19 companies interested in joining state oil firm PDVSA as minority partners paid $2 million each for a data pack with geological details of the areas under offer.

Companies that registered for the bid included BP (BP.L), Shell (RDSa.L), Total (TOTF.PA), Eni (ENI.MI), Statoil (STL.OL), Galp Energia (GALP.LS), Mitsibishi, Inpex (1605.T), China National Petroleum Corp Petrobras (PETR4.SA).

The government improved the terms for the projects last year, after lackluster interest from the companies led to a series of delays.

BONUSES AND FINANCING

Companies must pay bonuses between $500 million and $1 billion for access to the reserves. The bonuses are to paid in three installments after the joint ventures are created, perhaps in March.

Each offer is also required to include a proposal to provide direct financing to PDVSA to the tune of at least $1 billion, payable progressively.

PRODUCTION MODEL

Each project is expected to produce up to 400,000 barrels per day and the companies will have to build a crude upgrader for each project with a capacity of 200,000 bpd. The other 200,000 bpd will be produced by blending the tar-like crude with lighter oil.

The projects are due to begin production between 2012 and 2013 and Venezuela says they will be allowed to produce only 300 million barrels in total before the upgraders are ready.

INVESTMENTS

Investment is expected to reach between $10 billion and $20 billion per project. The upgraders alone cost between $6.5 billion and $12 billion each.

INFRASTRUCTURE

The crude will be upgraded in Soledad, a town in the eastern state of Anzoategui. It will be transported in pipelines to a shipping terminal to be built on the Araya peninsula in Sucre state. Byproducts like coke and sulfur will be exported from another terminal to be built in Punta Cuchillo at the edge of the Orinoco River delta.

TAX REGIME

Carabobo is likely to contain tax benefits for companies comparable to the current model in place for oil firms. The basic royalty is set to drop to 20 percent from 33.3 percent, if the government and auditing firms determine that the investment will not be recovered within 7 years.

A tax rate of 50 percent will also be applied to profits and the government estimates that its total take will be 64 percent of revenues, well above the minimum of 50 percent established by law.

Government sources say the ministry is likely to modify the rules so the Carabobo projects are exempt from a stringent windfall tax, or at least pay a lower rate.

INCOME

The Energy Ministry calculates the net income from early production in the first four years will be between $5 billion and $6 billion for each of the three projects -- enough to cover construction costs.

CORPORATE GOVERNANCE

The rules for Carabobo imply that companies will play a larger role in managing the projects than in current joint ventures with PDVSA, with 40 percent of the primary and secondary posts to be given to the firms.

INTERNATIONAL ARBITRATION

International tribunals will get involved only to resolve conflicts that arise regarding project financing.

Story by Marianna Párraga from Reuters
Reuters 02/02/2010 11:13

Petroleumworld welcomes your feedback and comments,
share your thoughts on this article, your feedback is important to us!We invite all our readers to share with us
their views and comments about this article. Write to editor@petroleumworld.comBy using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions, please write to:
editor@petroleumworld.comBest Viewed with IE 5.01+
Windows NT 4.0, '95, '98,ME,XP, Vista +/ 800x600 pixels