» Want a Reprint? » Printable Version June 4, 2003 East Bay Business TimesAlan Doyle

Intense daylong negotiations brokered by Benicia Mayor Steve Messina yielded an agreement Wednesday between Valero Energy Corp. and environmentalists that saves the company's $140 million refinery upgrade.

In a written settlement, a coalition of the Benicia-based Good Neighbor Steering Committee, the Solano County Green Party and Solano's Sierra Club chapter withdrew its appeal of the Planning Commission's decision to issue permits for the Benicia refinery's upgrade. The group dropped its opposition, which could have killed the project, in exchange for Valero's commitment to install anti-pollution equipment sooner than previously planned.

The agreement lays out a set sequence for installation of a wet scrubber to remove air pollutants and a water treatment plant. Valero also obtained what is known as an SB 25 air monitor for free through the Bay Area Air Quality Management District and the California Air Resources Board. Valero also agreed to a second, high-tech monitor that will track a wide range of pollutants.

The Valero Improvement Project, as the company has dubbed the upgrade, encompasses a cluster of renovations and expansions that Valero says it needs to complete over the next six years to remain competitive by processing a higher percentage of "sour" or more pollutant-laden crudes.

The Benicia refinery, with a throughput capacity of 165,000 barrels per day, provides about 25 percent of the Bay Area's gasoline and jet fuel. Valero says it must be able to switch to a greater percentage of Latin American crudes as cleaner Alaska North Slope supplies dwindle and become more expensive.

Valero says it can complete many of the individual components of upgrade without overall approval from the city, but it would not be able to install the wet scrubber that it needs to switch to the less costly crudes.

Valero says the project will generate hundreds of jobs and millions of dollars for local government and schools, as well as reducing air emissions.

Opponents claimed the environmental impact report approved April 28 by the Benicia Planning Commission was so flawed that it needed to be redone, which would take months and cost thousands of dollars.

Valero and environmentalists had been meeting for the past week to avert a showdown before the City Council. Dana Dean, a leader of the environmental coalition, and refinery General Manager Bill Buckalew credited Messina and his staff with brokering the deal, which was sealed minutes before the City Council was scheduled to consider the appeal.

If the City Council had overturned the Planning Commission's approval or opponents had sued to block Valero from proceeding, company officials had planned to abandon the project.

The refinery upgrade must still be approved by Valero's corporate headquarters in San Antonio, Texas. The project reportedly is competing against several projects for funding, including the possible purchase of a 280,000-barrel per day refinery on the island of Aruba near Venezuela.

Reach Doyle at adoyle@bizjournals.com or 925-598-1404.

ContraCostaTimes.comPosted on Wed, Jun. 04, 2003

ConocoPhillips, the third-largest U.S. oil company, bought 40 percent of a Venezuelan natural gas tract from San Ramon-based ChevronTexaco Corp. (CVX), www.chevrontexaco.com, ChevronTexaco said.

Terms of the purchase were not disclosed. ChevronTexaco, the second-largest U.S. oil company, retained 60 percent of Block 2 in Venezuela's offshore Deltana Platform tract, South America's largest natural gas reserve. The tract is located between Venezuela and Trinidad and Tobago.

ChevronTexaco, which won development rights to Block 2 in February, said in April it plans to spend as much as $1 billion to develop the tract.

Venezuela is counting on natural gas from Deltana to reduce its dependence on revenue from oil exports. Venezuela estimates the area holds up to $40 trillion cubic feet of natural gas.

Appointments

Shareholders of Pleasanton's Lipid Sciences Inc. (LIPD) re-elected two directors, William Pope, president and CEO of SunChase Holdings and president and a director of Sun NMA Inc., and S. Lewis Meyer, president and CEO of Lipid Sciences. The remaining four directors were not eligible for re-election. The board of directors also appointed Deloitte & Touche LLP to continue as the company's independent auditors for the 2003 year.

Compiled by Ellen Lee from company and wire reports. A new column is posted weekdays at the Business site on www.contracostatimes.com at 12:30 p.m. Got East Bay business news? Reach Lee at 925-952-2614 or at elee@cctimes.com.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, June 04, 2003 By: David Coleman

In a press release issued in Caracas this morning, ChevronTexaco and ConocoPhillips have announced a partnership in the exploration and development of Block 2 in Venezuela's offshore Plataforma Deltana was awarded to ChevronTexaco in mid-February by the Ministry of Energy & Mines (MEM).

ConocoPhillips is to acquire 40% interest while ChevronTexaco will hold 60% and remains the operator, both working in collaboration with Petroleos de Venezuela (PDVSA) which retains the right to acquire up to 35% at the time of a declaration of commerciality. Natural gas from the fields will be processed into liquefied natural gas (LNG) for export to the United States.

George Kirkland, president of ChevronTexaco Overseas Petroleum says “this agreement combines the already considerable experience in Venezuela of two world-class companies ... the project is part of ChevronTexaco’s strategic plans to commercialize its existing natural gas resource base and enable the creation and development of new natural gas growth opportunities worldwide.”

ChevronTexaco and ConocoPhillips are already involved with major projects in the Orinoco Belt where ChevronTexaco operates the Boscan and LL-652 fields in the west of the country while ConocoPhillips operates on behalf of partners in the Gulf of Paria West.

Ali Moshiri, managing director of ChevronTexaco Upstream Latin America says “ConocoPhillips was the logical choice for us as partner in Block 2 ... their existing reserves in the vicinity, extensive LNG experience worldwide and the strong position of both companies in the US natural gas market make us a very powerful team.”

The Miami Herald Posted on Tue, Jun. 03, 2003 BY TIM JOHNSON tjohnson@herald.com

WASHINGTON - Jack Kemp, a former NFL quarterback, legislator and vice presidential candidate in 1996, apparently wants to get into the lucrative oil business on behalf of Venezuela.

Kemp is a key figure in a proposed and unusual deal by a company with offices in New York to supply Venezuelan crude oil to help fill the U.S. strategic petroleum reserve.

The deal would allow Free Market Petroleum, which has Kemp on its board of directors, to supply 50,000 barrels of crude a day for three years to the U.S. government oil reserves in Texas and Louisiana.

If the deal goes through, which is still uncertain, it could bring Free Market Petroleum business of more than $1 million a day or as much as $1 billion over a three-year period.

The proposed transaction brings together Kemp, a widely known conservative who espouses free-market values, with a leftist government accused of being unfriendly to business. President Hugo Chávez has slapped controls on the Venezuelan economy and presided over a dramatic recession.

Perhaps as significantly, the accord signals that Venezuela wants to regain its image as a reliable supplier of crude to the U.S. markets following a calamitous two-month strike that briefly paralyzed its state oil industry.

Several facets of the deal are unusual.

Free Market Petroleum is a new company with no presence on the Internet and few known business deals under its belt. Its president, William Hickman, said in a brief telephone interview that the company is a year old and has offices in New York and London.

''We're a subsidiary of a larger company about which I can't go into,'' Hickman said.

The deal between Free Market Petroleum and the Venezuelan government has set off sparks in Caracas as well, for reasons unrelated to the U.S. firm.

The state oil company, Petroleos de Venezuela S.A., ''traditionally never has sold petroleum through intermediaries -- not only because it loses a margin through intermediation but also because the practice opens all sorts of doors to corruption,'' a newsletter last Friday by the Veneconomia consulting group said.

Venezuela's ambassador to the United States, Bernardo Alvarez, said Kemp arrived in Caracas last year with other representatives of Free Market Petroleum and pitched the idea of the company serving as a middleman to sell crude to the U.S. government.

''We talked to him,'' Alvarez said. ``We checked them out and, as I said, it's a registered company. It presented to us all the requirements we needed.''

Kemp's office said he was unavailable for comment.

Since 1977, the U.S. government has maintained stocks of crude oil in huge salt caverns in Texas and Louisiana. The stocks serve as an economic buffer against potential disruption of world oil supplies.

The Strategic Petroleum Reserve holds about 602 million barrels of crude, and the White House has directed that stocks increase to 700 million barrels.

U.S. policy bars direct purchases of oil from foreign governments, however, and that is where private companies such as Free Market Petroleum can do business.

Most of the oil accumulated in the salt caverns comprises in-kind contributions made by companies drilling along the U.S. continental shelf. The companies owe royalties for rights to pump the oil. Since some of the offshore oil is of poor quality, companies swap for better crude with other firms -- such as Free Market Petroleum -- to turn over to the U.S. government.

Venezuela, which supplies U.S. consumers with about 14 percent of their oil, says it is pleased with the prospect of selling to the Strategic Petroleum Reserve.

''There is a willingness in the government to increase our energy relationship with the United States,'' Alvarez said. ``It's a good business for Venezuela from an economic point of view. It's another client.''

The two-month strike in Venezuela last December and January paralyzed the state oil company, bringing production to a trickle. Since breaking the strike, Chávez has fired more than 17,800 of the company's workers, remaking an institution that had become a hotbed of discontent with his populist government. Venezuela claims it has recovered oil production to prestrike levels of more than three million barrels a day.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, May 14, 2003 By: Patrick J. O'Donoghue

Petroleos de Venezuela (PDVSA) and the US Free Market Petroleum Co have signed a contract to sell crude in the United States of America (USA) , broken down into $55 million barrels over a three-year period, which would represent just 8% of US reserves. 

Invoicing is estimated between $1-1.4  billion and the snag is that Venezuela will have to pay for the transport. 

Free Market Petroleum Co has been created exclusively to solve the new PDVSA marketing problem and is seen as a consequence of the opposition PDVSA executives & managers decision to use Venezuela's oil industry as a political tool to topple the Chavez Frias administration. 

Under the new setup, it is the Energy & Mines (MEM) Ministry that has turned into broker, which Minister Rafael Ramirez calls "a necessary change of paradigm." 

PDVSA is represented in the current contract by questioned official Ramon Guilarte and Juan Jose Ahumada, while Free Market Holdings is represented by William Hickman, Adrian Nash and Arturo Sarmiento, whose HQ is registered at suite 2110, Rockefeller Center NY. 

The original contract was signed on January 17 in the middle of the national strike/stoppage and corrected on January 23 after clarifying that Venezuela would pay transport, customs and port charges and Free Market Holdings pilot navigation charges.