Venezuela Wants Carabobo Oil Auction This Year

Venezuela Oil Minister, Rafael Ramirez
(Click to Enlarge)

CARACAS (Dow Jones Newswires), Aug. 11, 2009

Venezuela's oil minister said the government wants the Carabobo auction for heavy oil drilling rights to take place before the end of the year.

"Our goal is for it to take place this year," Rafael Ramirez said in an interview published Tuesday in El Nacional newspaper.

He added that companies interested in bidding have been busy forming consortiums in which they would bid on the oil blocks together to reduce start-up costs and share equipment.

Still, Ramirez said the government "isn't in any huge rush" to wrap up the auction, which has been delayed several times and currently has no set deadline for receiving bids.

Ramirez said the upward move in oil prices is working in the government's favor as it seeks out top-notch global oil companies that can transform the tar-like crude into marketable oil and gasoline.

The average price for Venezuela's basket of crude oil and refined products jumped $4.57 last week from the previous week to $67.73 a barrel. Still, the average price for the year is $49.24 a barrel, much lower than last year's $86.49 a barrel.

Companies including Chevron Corp. and Royal Dutch Shell PLC have expressed interest in the Carabobo bidding in the Orinoco region, amid promises of huge reserves. But generally lower global oil prices, a weak global economy and an uncertain regulatory environment in Venezuela have made the oil companies reluctant to commit to the project.

Also in the interview, Ramirez said Venezuela's purchases of natural gas from Colombia may be eliminated due to a dispute over Colombia's plan to allow more U.S. soldiers to operate on its military bases.

"It would be no problem for us to stop buying gas from Colombia," he said.

While electricity in some areas of western Venezuelan is dependent upon gas from Colombia, Venezuela would make due without it, Ramirez said. "We can supply [natural gas] to our whole country," Ramirez said.

The oil minister's comments add to the deteriorating trade relations between the two countries that stems from Venezuelan President Hugo Chavez' opposition to a plan announced last month to allow additional U.S. troops to operate in Colombia for counter-narcotics operations.

Chavez says the U.S. wants to bulk up its military presence in Colombia in anticipation of a possible invasion of Venezuela to take control of the country's massive reserves of petroleum.

Chavez over the weekend said he was immediately halting the sale of subsidized fuel to Colombia, adding that if they want it, they can pay full price.

On that subject, Ramirez said the sale of subsidized fuel to Colombia "will be suspended and will depend on how relations develop" between Colombia and Venezuela.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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