PdVSA, ConocoPhillips, Chevron Set Transition Team for Orinoco, Corocoro

Orinoco Heavy Oil Belt
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CARACAS Mar 08, 2007 (Dow Jones Newswires)

ConocoPhillips (COP) and Chevron Corp. (CVX) have agreed to set up a transition team with Petroleos de Venezuela SA to guarantee stable supply during the transfer of two major projects in the Orinoco tar basin and the Corocoro offshore oil block, said PdVSA on its Web site Thursday.

Last month Venezuela published a decree forcing all outside oil operators to transfer day-to-day control to the PdVSA by May 1. The state oil firm is also demanding at least a 60% majority stake in private oil operations before the end of June.

The oil majors involved, which includes ConocoPhillips, Exxon Mobil Corp. (XOM) and Total (TOT), have yet to reach a formal agreement with Venezuela on what the new joint-venture companies will look like, and it is not clear if all partners will continue working with PdVSA.

This week, Exxon said it would leave the Cerro Negro Orinoco venture if profitability is too low under the new terms. Regardless, the Irving, Texas-based firm set up a technical team with PdVSA on Monday to transfer operations to PdVSA by May 1.

Other majors, including Total, have expressed a stronger desire to continue working with PdVSA under a new business model that gives increased control and revenues to the state.

Chevron has joined the transition team for the Hamaca project, one of the Orinoco tar projects where it is a partner with PdVSA and ConocoPhillips.

The other Orinoco project is Petrozuata, where only ConocoPhillips and PdVSA hold stakes. Petrozuata is a 120,000 barrel a day project in the Orinoco, which holds the largest unconventional crude deposits on the planet, followed by Canada's tar sands. Hamaca is a 200,000 b/d project in the same area.

The four integrated projects in the Orinoco cost an estimated $17 billion to get off the ground, including expensive upgrading plants that convert the tar oil into a lighter, marketable grade of crude.

At Corocoro, an offshore oil block in eastern Venezuela, ConocoPhillips began a 14-well drilling program in mid-2006. The project will begin early production of 30,000 b/d in June, and then reach 80,000 b/d by the third quarter of 2008 after the drilling program is fully completed.

Copyright (c) 2007 Dow Jones & Company, Inc.

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