News agency Bloomberg quoted deputy oil minister Luis Vierma as saying on Tuesday that the agreement would be signed early next week along with two other gas deals with Spanish company Repsol YPF and Japan's Teikoku.
The Vinccler agreement calls for the sale of up to 249 billion cubic feet (bcf) of gas to be delivered into PDVSA's ICO gas pipeline system over 10 years at a net price of US$1.33 per thousand cubic feet.
"It's not a traditional take-or-pay, it's just a basic 10-year gas sales agreement," PetroFalcon CEO Bill Gumma told BNamericas, adding PDVSA will "buy all the gas we can produce initially."
"We will sell PDVSA as much gas as we can produce up to 249bcf, any gas over that amount will call for a renegotiation of the gas price," Gumma said.
PDVSA started work on the US$470mn east-west ICO pipeline in May this year and the first 70km phase is a 36-inch diameter pipe linking Vinccler's East Falcon block to PDVSA's Paraguaná refinery.
The gas to be sold under Vinccler's contract will come from its proven and probable reserves on the Cumarebo and La Vela fields in the East Falcon block. Production from La Vela field will start up in the second quarter of 2005 when PDVSA's ICO pipeline reaches that zone, and in the third quarter from the Cumarebo field, Gumma said.v "We plan to have both fields on by the end of third quarter next year," he said.
Natural gas delivered to the ICO pipeline will be transported to the Paraguaná refinery, where it could displace oil currently being burned to generate power, Gumma said.
PDVSA "has indicated the first thing they will do is displace fuel oil currently being burned at the Paraguaná refinery to generate power, but they may have other more pressing needs," Gumma said.
2005 DRILLING PLANS
Vinccler currently has about 25mcf/d of shut-in gas production on La Vela and Cumarebo, waiting for the ICO pipeline to connect to the fields. The company aims to have a drilling rig out in the La Vela field by mid-January and at least 50mcf/d gas production on the two fields by end of the third quarter next year, Gumma said, adding that, subject to drilling results, the production will be split roughly 50:50 between La Vela and Cumarebo.
"The plan is to have one rig full time which will drill a batch of wells on La Vela and then move to Cumarebo," he said. La Vela has three existing wells that were drilled by PDVSA in the 1980s, of which two are currently producing primarily oil. The third well is shut-in with 7-8mcf/d of gas potential, Gumma said.
Both La Vela and Cumarbeo have significant oil and gas reserves and multiple reservoirs, but La Vela is "a larger structure and much less explored" than Cumarebo, the CEO said.
Vinccler plans to drill about 10 wells "in and around" La Vela and Cumarebo in 2005, subject to PDVSA approval, Gumma said, adding: "It's a combination of development wells and exploration." The company expects PDVSA to approve its drilling plans after the gas agreement is signed.
Vinccler is in the "final stages" of negotiating a US$36mn loan from the International Finance Corporation (IFC), the private sector arm of the World Bank, to finance work on the East Falcon block, Gumma said.
The financing agreement is expected to close by year-end or January 2005 at the latest, he added.
The loan would become available in tranches upon PetroFalcon reaching certain milestones, the company said in a statement.
Interest rates are tied to the six-month Libor rate. The maturity of the loan varies between six and eight years, the statement said.
Vinccler also plans to participate in the energy ministry's offshore tender for blocks in Falcón and the Gulf of Venezuela, which should be held in February 2005, Gumma said. "We're interested in expanding out business in western Venezuela," he said, adding Vinccler is talking to various companies about partnering on the tender. The East Falcon block is located in Venezuela's western Falcón state, just east of the Paraguaná peninsula.
PetroFalcon signed an operating services agreement for the block with PDVSA in 1994 under the hydrocarbons law. PetroFalcon is headquartered in Caracas, but is listed on the Toronto Stock Exchange.
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