Gazprom, Chevron Sign E&P Contracts for Rafael Urdaneta Blocks

Venezuela's energy and oil ministry has signed two contracts with Russian oil company Gazprom and US-based Chevron (NYSE: CVX) to explore for gas off the coast of western Venezuela in the first stage of the Rafael Urdaneta project, the ministry said in a statement.

Gazprom bid US$15.2mn for the Urumaco I block and US$24.8mn for the adjacent Urumaco II block in early September, while Chevron bid US$5.6mn for the Cardon III block.

During the official contract signing ceremony on Tuesday in Falcón state, Venezuela's President Hugo Chávez said developing the country's 150 trillion cubic feet of natural gas reserves is of the "greatest strategic importance."

State oil firm PDVSA aims to increase gas production in Venezuela for use in thermoelectric power generation and industrial processes to substitute liquid fuel, thereby freeing up more diesel and fuel oil for export at high international prices.

The total estimated investment in the first four years of Rafael Urdaneta's first stage is estimated at US$98mn.

A total of six blocks were offered in this first stage of Rafael Urdaneta, but the tender for the Urumaco III block was declared void because the bids received were "insufficient" and the other two blocks, Moruy III and La Vela Sur, received no offers at all.

The ministry has launched a second tender for five more blocks: Urumaco III (declared void in the first tender), Moruy II, Castillete Noreste II, Cardon II and Cardon IV. Bids will be received on November 9.

The Rafael Urdaneta project consists of 29 blocks in the Gulf of Venezuela off northern Falcón state in an area covering 30,000 sq km with total gas reserves estimated at 26 trillion cubic feet. Venezuela plans to tender the blocks in different stages.

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