Executive: US$14bn Projects to Kick-Start Investment Cycle

Oil companies in Venezuela's hydrocarbons association AVHI have identified investment opportunities worth US$14bn and are working with the government on ways to translate the opportunities into specific projects, kick-starting a new investment cycle in the country, AVHI executive president Luis Grisanti told BNamericas.

The natural gas and liquefied natural gas (LNG) projects identified total US$7.5bn, petrochemicals US$2.5bn and the upstream crude sector US$4bn, "which is not a significant figure - we want more," Grisanti said.

"We think that if we can jointly formulate a specific set of proposals under the hydrocarbons law, which are competitive internationally, there will be growing investment in Venezuela," he said. AVHI member companies, which currently produce over 1 million barrels of oil a day (mb/d), invested US$25bn in crude projects alone from 1992 to 2003.

But recently "there has been a decline in investments, and what we are working on is how to launch the next investment cycle," he said.

Venezuela's huge reserves "are costly, expensive, and technologically and geologically complex, so we need to incorporate new incentives," he said, detailing that AVHI has identified three core areas to focus on: gas, the Orinoco belt, and the reactivation of low-productivity fields.


AVHI and its member companies have been having institutional meetings with the ministry of energy and mines and the Corporación Venezolana de Petróleo (CVP) to discuss the bidding process for six offshore blocks in the Gulf of Venezuela and two to the north of Falcón state.

On Wednesday (July 7) the ministry sent invitations to some of the potential bidders to participate in the process. "That's part of the result of our talks with them [the ministry]," Grisanti said, adding that the ministry has previously indicated that the blocks would be awarded towards the end of the year.


Deputy hydrocarbons minister Luis Vierma has indicated that the ministry will soon open up the process leading towards the awarding of new blocks in the belt. Companies that already produce super heavy crude from the belt and upgrade it are US-based ConocoPhillips and ChevronTexaco (NYSE: CVX), France's Total (NYSE: TOT), Norway's Statoil (NYSE: STO) and Germany's Veba Oel, all in partnership with state oil company PDVSA, and a number of them have already indicated their willingness to take on further similar projects.

The ministry is likely to brief companies "within a period of months" on the opportunities on offer, open a data room and then receive and open bids some three months after that, Grisanti said.


In the first, second and third rounds of operating agreements, low-productivity fields were known as marginal fields. Companies signed service contracts for these fields and assumed full operating and financial responsibility to produce oil for PDVSA in return for a per-barrel fee. Because of this the companies did not have equity of the oil. However, in a new round of bidding that AVHI is encouraging the ministry to launch, the model would be based on mixed enterprises through which both PDVSA and the private sector companies would have equity in the fields, Grisanti said.

PDVSA has come to an internal decision on which blocks it would offer, but has not yet disclosed that information, he added. Furthermore, "We also want to participate in upstream [greenfield] light and medium crude opportunities. There are opportunities like Tomoporo, Chaguaramal, Tacata and Cotoperí."

"PDVSA has said they would do it themselves, but we are telling them we are ready to invest," Grisanti said. "We have told them [the ministry] that we are here to invest long-term. We want to see business opportunities, greenfield projects, and we are ready to invest."

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