Feature: Venezuela awards gas licenses
www.upi.com By Owain Johnson UPI Business Correspondent From the Business & Economics Desk Published 2/18/2003 1:08 PM
CARACAS, Venezuela, Feb. 18 (UPI) -- U.S. company ChevronTexaco and Norway's Statoil will soon be gearing up to develop part of Venezuela's giant offshore gas deposits, after having received licenses from the government.
The companies received development blocks in the Plataforma Deltana gas field, which is situated in Venezuelan coastal waters adjacent to the country's maritime border with Trinidad and Tobago.
Venezuela has proven natural gas reserves of 147 trillion cubic feet, or tcf, the eighth-largest in the world. The Plataforma Deltana field is estimated to hold at least 38 tcf.
The two successful companies will seek to export most of the gas to the United States, which analysts estimate will require an additional 40 tcf of gas by 2020.
The Venezuelan authorities had divided the gas-field into five blocks. Statoil was awarded Block 4, while ChevronTexaco was awarded Block 2. British Petroleum is still in negotiations to secure Block 1, while Block 3 was withdrawn after failing to attract a large enough bid.
Block 5 has not yet been put up for auction. The block is the largest and most complex of the concessions and several technical questions still remain to be resolved.
Venezuelan President Hugo Chavez attended the signing of the agreement and spoke at great length of his satisfaction that major international investors were still flocking to the oil-rich country despite its difficult political and economic situation.
"This is a historic act," the president said. "Venezuela will become a world power in gas production."
He hailed the deals as a victory over his political enemies, whom he described as "coup-mongers, fascists and terrorists." The president has just survived a two-month general strike launched by the opposition in an attempt to force his resignation.
The agreements were, however, somewhat anti-climactic compared with the announcement of the favored bidders in August. At that time, hopes were high that more companies would be involved in the development of the gas-field and that the auction would raise vast sums for Venezuela.
Since the August ceremony, the BG Group, formerly British Gas, pulled out of the bidding process, while France's TotalFinaElf offered only $100,000 for Block 3, leading the government to withdraw the block from the auction.
Statoil offered $32 million for its block, while ChevronTexaco offered $19 million for its exploration and development license, making it unlikely the government will meet its prediction that $1.1 billion will be invested in gas projects in 2003.
The fall-off in demand for the licenses has been blamed on a combination of lower international gas prices and a clause in the concession contracts that allows state-owned energy producer Petroleos de Venezuela, or PDVSA, to take a stake of up to 35 percent in the projects.
PDVSA was badly hit by the recent general strike, and having sacked around a third of its staff for observing the stoppage, few international companies are likely to view it as an ideal partner for a long-term venture.
The disappointing bids for the Deltana blocks had led some opposition figures to accuse Chavez of selling Venezuela's reserve off cheaply for short-term political advantage.
ChevronTexaco's representative in Latin America, Ali Moshiry, drew applause at the ceremony when he dismissed allegations of malpractice by the Venezuelan government.
"ChevronTexaco can assure you that the process has been transparent and has observed all applicable laws," he said. "If its integrity had been suspect, ChevronTexaco would not have taken part."
The successful companies will spend the next two to three years exploring their concessions and designing a commercial production program. The first gas from the fields should reach the United States in late 2007 or early 2008.
The Venezuelan government hopes the Plataforma Deltana project will spark a revival in the country's crisis-hit industrial sector as well as giving PDVSA the technical know-how to carry out other offshore operations.
Under the terms of the agreement, the partner companies must source a significant percentage of their pipeline and other hardware from Venezuelan companies and share technical knowledge with PDVSA.
The state-owned company lacks offshore experience since its operations have previously been confined to Lake Maracaibo, and the government hopes that by learning from its foreign partners, PDVSA will eventually be able to bid for offshore projects in Colombia, Mexico and Brazil.
PDVSA is placing great emphasis on raising natural gas output, after a company study suggested gas will account for one third of total world energy demand within the next 20 years.
One of the main advantages of natural gas to Venezuela is that unlike Venezuelan petroleum, gas isn't covered by any quota pact, such as that operated by the Organization of Petroleum Exporting Countries. This will allow PDVSA and its partners to boost gas production in line with any growth in the world market for gas.