Venezuelan Field Falls Short of Expectations

The consortium operating Venezuela's LL-652 marginal field took large fourth-quarter write-downs as the block continues to fall short of expectations. "We and the partners recognize that this is a smaller business than we initially thought," stated Marcel Kramer, of Statoil.

The Norwegian firm was hit with a $220 million charge at the end of 2001 as production levels for the past two years have held steady at around 16,000 barrels per day (bpd) despite investments of around $1 billion since 1997. Partner and field operator ChevronTexaco Corp. said in its fourth-quarter earnings report that it took a $247 million write-down and pressure problems "resulted in the reduction in the projected volumes of oil recoverable during the company's remaining contract."

The Chevron-led consortium won the 20-year contract to reactivate the LL-652 field in 1997, one of 20 aging oil blocks offered in Venezuela's third licensing round to private sector companies in a bid to increase the country's crude production. The group bid to invest around $2 billion to push production to over 100,000 bpd and also paid a bonus of $215 million to secure the promising contract.

LL-652 has not been the only Venezuelan marginal field to produce poor results. After bidding huge sums for blocks in Venezuela, yields from exploratory drilling proved disappointing enough for some firms to later resell or return projects. However, both Chevron and Statoil remain committed to LL-652. "We have to adjust our resources and focus to run it efficiently on a smaller scale," Kramer said.

ChevronTexaco operates LL-652 with a 27% interest, Statoil holds a 27% interest, BP holds 36% and percent and PDVSA holds the remaining 10%.