Eni OKs Heavy Oil Venezuela Project, to Build Facility

ROME (Dow Jones Newswires), Nov. 22, 2010

Eni Monday said it has signed contracts in Venezuela involving heavy oil and a refinery build, as part of its aims to expand by taking on large hydrocarbon projects.

In a statement, Eni said Chief Executive Paolo Scaroni signed the contracts in Caracas with Energy Minister Rafael Ramirez, setting up two companies to be controlled by Petroleos de Venezuela, or PDVSA.

PetroJunin will be dedicated to the development of the Junin 5 Block, while PetroBicentenario will construct and operate a refinery in the existing coastal industrial complex of Jose. PDVSA will own a 60% stake in the two companies, and Eni will hold the remainder.

Eni is targeting Venezuela's large oil and natural gas projects amid high prices while some of its peers avoid the country following President Hugo Chavez's nationalization of assets in the past decade. Last week, Eni increased its gas reserves estimate at Venezuela's Perla field after successfully drilling a well.

Eni said it will pay a bonus share of $646 million. It added that $300 million of this will paid when the two companies are incorporated, while the balance, in installments, is based on reaching specific targets.

Eni, Italy's biggest energy company by market value, confirmed it estimates an early production at the Junin 5 Block of 75,000 barrels a day by 2013, and expects to reach a peak of 240,000 barrels a day in 2018.

The new refinery will have a capacity of 240,000 barrels a day, and will be able to process additional volumes of about 110,000 barrels a day from other PDVSA facilities.

Eni said it estimates its daily production in Venezuela will jump to more than 180,000 barrels of oil equivalent in 2019 from today's 10,000.

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