Venezuela will accept bids under a second round next year from private foreign and domestic companies for production contracts to operate marginal active as well as inactive oil fields.
The first such round came earlier this year, involving about 55 other marginal, inactive fields. It resulted in two contracts signed with domestic and foreign companies. It represented the first time since nationalization of the petroleum industry in Venezuela in 1976 that private companies were allowed to produce oil in the country.
A public bid tender was expected at presstime last week.
SECOND ROUND
The next round will cover 13 producing units containing 73 oil fields that hold "significant" volumes of light and medium crudes, said Venezuelan Minister of Energy and Mines Alirio Parra.
The ministry estimates that the 73 fields together contain proved reserves of more than 1.2 billion bbl of light and medium crude and condensate. Some of the fields also contain heavy crudes.
The fields, some of which are producing, are considered marginal because they are not part of state petroleum company Petroleos de Venezuela SA's main production base. Although Pdvsa has set some ambitious production and productive capacity targets this decade, the cash strapped company has set its sights on prolific eastern region strikes and the vast heavy oil resources of the Orinoco belt to underpin that growth.
The 73 marginal fields would be capable of producing a combined 260,000 b/d if fully developed during the next several years. No estimates were given for production from marginal fields currently producing or the ratio of active to inactive fields. Venezuela currently produces about 2.5 million b/d.
IMPROVED FLEXIBILITY
Parra said the new operating contracts will be more flexible than those signed earlier this year.
Under the new agreements, operators-who will produce but not own the oil and gas-will be allowed to explore beyond horizons reached by the original concessionaires that operated the fields before nationalization.
As was the case with the first marginal field operating contracts, companies must cover all investments in production infrastructure and will be paid according to volumes of oil or gas they produce. All production will be delivered to Pdvsa's vertically integrated operating subsidiaries Corpoven, Lagoven, and Maraven, which will operate the production units.
Other elements of the agreements cover compensation for capital investments made during the life of the operating agreements.
Parra said information on bidding procedures and technical data on the fields will be provided to prospective investors in January, and prequalifying will be complete by the end of March. The government hopes to complete the bidding round by June 30, 1993.
PRODUCTION UNIT DETAILS
Maraven will be responsible for five production units holding a combined 572 million bbl of light, medium, and heavy crude: West Falcon, East Falcon, Falcon offshore-never operated for commercial production-West Zulia, and Colon.
Corpoven will coordinate operations in five production units with combined proved reserves of 400 million bbl of light, medium, and heavy crudes and condensate.
Those five units, each of which holds at least two oil fields, are West Guarico, Sanvi (Guere), Oritupano-Leona, Quiamare-La Ceiba, and Casma-Soledad. West Guarico is in Central Venezuela, and the others are in eastern Venezuela.
Lagoven will oversee reactivation of three production units, each with one large field with the same name as the unit: Jusepin and Quiriquire in the east, and West Urdaneta in Lake Maracaibo. Proved reserves in these units are pegged at 235 million bbl of light, medium, and heavy crude and condensate.
Some of the fields and production units also were offered in the first round (see map, OGJ, Aug. 19, 1991, p. 14).
FIRST ROUND UPDATE
The new round of bidding and liberalized contract terms reflect a more pragmatic attitude by Caracas in obtaining outside help for Pdvsa in order to hike productive capacity.
Pdvsa, chafing under a heavy tax bite (OGJ, Nov. 16, p. 33), has been forced to trim its medium term investment program and seek greater international participation in its petroleum operations than had been anticipated.
In June, four private groups/companies won the right to operate several other marginal fields (OGJ, June 29, p. 40). That first round proved disappointing because two of the winning bidders, Shell de Venezuela SA and Lingoteras de Venezuela CA, failed to sign final agreements with Pdvsa and the energy ministry.
Shell, the only major company to win in the first round-for the right to operate Pedernales field-refused to sign because of a dispute over a legal issue. Shell was willing to operate under Venezuelan law but wants legal jurisdiction stipulated in New York state. That means any legal dispute would have to be resolved by arbitration outside Venezuela, a precedent the Venezuelan government would not accept.
Shell and other companies lost large sums of money after the 1976 nationalization when compensation promised them by the government never materialized because of claims for back taxes the companies deemed spurious. The compensation issue was settled in Venezuelan courts.
Venezuelan industry sources cite British Petroleum Co. plc as a likely candidate to pick up the contract Shell passed on. While BP did not win a contract in the original bidding, it is clearly interested in gaining a foothold in Venezuela.
Pedernales, in northwestern Delta Amacuro state, is estimated to hold 49 million bbl of probable heavy crude reserves and 185 million bbl possible reserves. Pedernales cumulative production is 59 million bbl.
Lingoteras, a private Venezuelan group that planned to operate Cumarebo and onshore La Vela fields in conjunction with two U.S. companies, could not raise the funds the government deemed necessary for production investment (OGJ, Aug. 10, Newsletter).
The other two winners, Japan's Teikoku Oil Co. and a combine of Benton Oil & Gas Co., Oxnard, Calif., and Vinccler CA Production, Caracas, signed operating agreements calling for outlays of $280 million the next 10 years (OGJ, Nov. 2, Newsletter). They will operate fields in eastern Guarico state and southeastern Monagas state.
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