The Rising Influence of Rising Affluence

[DewDiligence]

Chevron really wants to do business with Hugo Chávez. I don’t understand why.

http://www.reuters.com/article/idAFN1223387620100512

›Oil Companies Sign Orinoco Deals With Venezuela

Wed, May 12 2010
By Marianna Parraga

• Oil belt seen as one of biggest in world
• Government hails investment, job creation

CARACAS, May 12 (Reuters) - Companies chosen to exploit two projects in Venezuela's vast Orinoco heavy crude belt signed joint venture deals with the government on Wednesday, coming a step closer to being able to book large potential reserves.

The projects are part of a plan to develop the oil belt, considered one of the largest in the world. It is slated to add 2.1 million barrels per day of new production.

Operated by Venezuelan state oil company PDVSA, the projects are mostly set to begin producing tar-like Orinoco crude by 2013, with a total investment of some $80 billion.

In the first joint venture signed on Wednesday, PDVSA takes 60 percent while Spanish giant Repsol <REP.MC>, Malaysia's Petronas [PETR.UL] and India's ONGC <ONGC.BO> have 11 percent. Two other Indian companies make up the remaining shareholding.

"Yes (we will book the reserves), when the project evolves. But investment decisions must be made and there must be marketability before we enter the reserves. Not before," Repsol chairman," Antonio Brufau told Reuters before the signing.

Venezuelan Energy Minister Rafael Ramirez told Reuters earlier this year companies that won tenders for the Orinoco projects could book the reserves "for accounting purposes".

But Ramirez cautioned that the companies would not be allowed to use the reserves as debt collateral.

The second joint venture is also headed by PDVSA with 60 percent, and includes Chevron <CVX> with 34 percent.

"We have investments of $80 billion, an increase of 2.09 million bpd, payments to the government of $5.7 billion and substantial employment generation," Ramirez said, referring to the combined Orinoco projects.

Just three years ago, Venezuela nationalized projects in the Orinoco belt. [XOM and COP, among others, left the country permanently.] Renewed interest in the region demonstrates how much big oil companies need to replenish dwindling global crude reserves despite considerable political risks.

"Why are we in Venezuela? Because there is a great deal of oil there," Ali Moshiri, Chevron's president of exploration in Africa and Latin America, told reporters in Caracas.‹