Three Oil Companies Agree to Switch Venezuela Contracts to JVs

CARACAS Oct 07, 2005 (Dow Jones Commodities News Select via Comtex)

Three foreign oil companies have agreed to operate their Venezuelan oil fields as a minority partners with the state oil company, a spokeswoman for the oil ministry said Thursday.

Japan's Teikoku (1601.TO), France's Perenco and Argentina's Tecpetrol (TNCT.YY) have agreed to turn operating contracts into joint ventures with Petroleos de Venezuela S.A. (PVZ.YY). The three firms operate a total of five fields in Venezuela. Teikoku and Perenco each have two fields, while Tecpetrol operates one.

Oil Minister Rafael Ramirez made the announcement at an oil conference in the eastern city of Cumana, the spokeswoman added.

Teikoku, Perenco and Tecpetrol are the latest firms to reach preliminary joint venture agreements with PdVSA, as the state oil firm is known, to overhaul their operating contracts.

In August eight firms with operating contracts signed similar deals. A total of 22 private or foreign state oil firms signed contracts in the 1990s to operate aged Venezuelan oil fields for a fee. But the administration of President Hugo Chavez says these contracts violate national law, and is forcing them to convert the contracts into joint ventures by the end of the year or abandon their operations.

Venezuelan law forces PdVSA to hold at least a 51% stake in upstream oil projects. Ramirez, who is also the head of PdVSA, recently said the company would probably take anywhere from 60% to 80% of each field.

The 22 firms currently pump a total of 550,000 barrels a day, which could rise to as much as 600,000 b/d in 2006, a PdVSA executive said this week.

The contract changes come as Venezuela looks to take more control over private oil operations and increase revenue from them. Apart from the contract changes, Venezuela has raised royalty and tax rates on Venezuelan output.

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