Venezuela Seeks Rigs for Mariscal Sucre Gas Project

CARACAS Oct 23, 2006 (Dow Jones Newswires)

Venezuela is seeking offshore rigs to begin the Mariscal Sucre natural gas project during the first quarter of next year - part of an effort to plug a domestic gas deficit and begin exports in coming years.

Carlos Figueredo, the general manager of offshore projects for Petroleos de Venezuela S.A. (PVZ.YY), remains optimistic PdVSA will find rigs despite strong demand.

Booming profits in the oil and natural gas industry have spurred new exploration and development, creating a tight rig market for companies looking to spud new wells.

But Figueredo said the rigs PdVSA hopes to hire for Mariscal Sucre are available in the market. "In the size we're looking for there are some options," said Figueredo late Friday at a natural gas conference.

Mariscal Sucre is located in shallower waters than reservoirs in neighboring Trinidad, a major gas exporter, or in Venezuela's Deltana Platform, where Chevron Corp. (CVX) and Statoil (STO) are investing in offshore blocks.

Statoil SA (STO) was forced to delay drilling at Venezuela's Deltana platform for over a year because it couldn't replace a rig with operational problems. It had to wait for Transocean (RIG), the rig's owner, to overhaul the equipment before it could tackle the deep waters and strong currents in Venezuela's Atlantic.

Mariscal Sucre presents fewer technical challenges. PdVSA hopes to drill eight wells at the Dragon section of Mariscal Sucre in the next two years, bringing 600 million cubic feet per day of new natural gas on line.

Petrobras Still Undecided

PdVSA looks to get Mariscal Sucre off the ground with or without Petroleos Brasileros SA (PBR), which it invited to join the venture last year after ditching Royal Dutch Shell Plc. (RDSA.LN) after years of stalled negotiations.

PdVSA and Petrobras hoped to reach a decision by this June, but continue hammering out the details of the multi-billion-dollar project despite recent overtures by PdVSA. The Venezuelan state firm is now offering its Brazilian counterpart a 40% equity stake, up from the 35% it originally offered.

PdVSA dropped Shell because the Anglo-European firm insisted on a majority.

"Talks are still on," said Ricardo Savini, a Petrobras business development manager, speaking at the same conference.

He said "high-level" negotiating teams from each firm are working on the deal, but declined to specify what the current sticking points are.

Venezuela looks to use Mariscal Sucre's gas to supply domestic demand and the Great Pipeline of the South, a plan by President Hugo Chavez to use Bolivian and Venezuelan reserves to supply the South American market.

Questions remain as to whether the $20 billion gas pipeline will fetch high enough prices to cover investment costs.

Petrobras also has other points of entry to Venezuela's gas industry. Savini said the company will begin in January a $16 million seismic program in the Gulf of Venezuela, where Petrobras has an exploration license for the Moruy gas block. Petrobras is also developing two on-land gas licenses.

This year the company signed up for Venezuela's Delta Caribe licensing round, four offshore blocks PdVSA plans to offer in December.

Venezuela has the largest natural gas reserves in South America, but still suffers from a domestic deficit of the fuel. The domestic oil industry uses roughly 70% of production to inject into aged oil wells, as a fuel for production operations, and as a feedstock for the petrochemicals industry.

Copyright (c) 2006 Dow Jones & Company, Inc.

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