Ministry Delays PetroFalcon E&P License, Refunds US$7.38mn Bid

Vinccler Oil and Gas, the Venezuelan unit of Canadian oil company PetroFalcon (TSX: PFC), has signed an agreement with the energy and oil ministry not to seek damages resulting from the postponement of exploration on the Castilletes Noreste 2 block, Vinccler said in a statement.

In return Vinccler will receive a full refund of the US$7.39mn bid bond it paid to the ministry, the statement said.

The block was awarded to Vinccler as one of three offshore blocks awarded in the Rafael Urdaneta phase B offshore lease sale in the Gulf of Venezuela last November.

"Due to circumstances beyond the control of the company, Vinccler has been prevented from commencing exploration and exploitation activities at this time. As Vinccler has waived all claims for damages that could arise from the postponement of the start of exploration and exploitation activities in the block, the ministry agrees to start procedures with the national treasury to return to Vinccler the US$7.39mn bid bond paid for the block," the statement said.

Vinccler will also have the exclusive right to exercise the option of starting exploration and production activities on the block "when circumstances permit," the statement said.

Officials from the energy and oil ministry contacted by BNamericas declined to provide a reason for the decision not to sign the contract and a Vinccler official said the company could not say what motivated the government's actions.

Vinccler CEO Juan Francisco Clerico told BNamericas in November that he expected the Castilletes Noreste II block in western Venezuela to contain up to 3 trillion cubic feet of natural gas and an unknown amount of crude.

The ministry had said it expected the company to invest about US$85mn in Castilletes Noreste II over the next four years. If oil were found on the block, Vinccler would have to establish a joint venture with state oil firm PDVSA, which is required by law to have at least 51% of all oil projects in Venezuela.

The other two blocks awarded in Rafael Urdaneta Phase B were the Moruy 2 block to a consortium made up of Brazil's federal energy company Petrobras (NYSE: PBR) and Japanese energy firm Teikoku for US$19.5mn, and the Cardon 4 block to Italy's Eni (NYSE: E) and Spain's Repsol YPF (NYSE: MCE) for US$34.4mn.

The 30-year licenses were supposed to be signed formally on November 30 at an official ceremony in Paraguana, Falcon state, but the signing was reportedly delayed because President Hugo Chavez was unable to attend the ceremony.

A Repsol YPF official told BNamericas in an email that the company signed an E&P contract for the Cardon 4 block on January 27 and that E&P work is continuing "on schedule."

Petrobras officials contacted by BNamericas would not confirm if their contract for the Moruy 2 block has been signed.

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