Venezuela: ExxonMobil, ConocoPhillips to End Presence in Orinoco Projects

ConocoPhillip's (COP) and Exxon Mobil Corp. (XOM) are negotiating exit terms from their interests in multi-billion dollar projects in Venezuela's Orinoco heavy oil belt.

Conoco and Exxon now "end their participation in the businesses of the Orinoco River belt and shared profit fields," Energy Minister Rafael Ramirez during a signing ceremony, at which four other international oil companies agreed to become minority partners in projects they once controlled.

Ramirez said Conoco and Exxon are "still negotiating to wind down these partnerships," and noted that both have informal pacts to continue the exit talks, which should conclude sometime before Aug. 26.

Ramirez also noted that compensation talks with the other the oil majors that have agreed to reduced stakes are to conclude as soon as possible. These include Chevron Corp. (CVX), Statoil (STO), Total (TOT) and BP Plc. (BP).

Under the terms of the new deals, Petroleos de Venezuela, or PdVSA, has an average stake of 78% in the four oil projects, PdVSA said in a Tuesday statement, effectively doubling its previous average equity interest in them.

In the Cerro Negro oil venture that Exxon ran, PdVSA now has a 83.37% stake, while BP holds a 16.63% interest. Exxon had held a 41.7% stake, PdVSA a 41.6% and BP controlled 16.7% of the project, which produces 105,000 barrels per day.

At the Ameriven, or Hamaca, joint venture where Conoco held a majority 40% stake, PdVSA now controls 70% and Chevron will take the rest. Its production runs at 190,000 barrels a day.

Conoco is losing its 50.1% stake in the Petrozuata project, over which PdVSA now has complete control. Petrozuata's output amounts to 104,000 barrels a day. Conoco is also losing its position in the La Ceiba field, a "shared profit" deal with PdVSA.

Lastly, in Sincor, which produces 180,000 barrels a day, PdVSA has taken a 60% stake, Total a 30.3% interest and Statoil's stake stands at 9.7%. PdVSA used to have a 38% interest, Total a 47% stake and Statoil 15% of the project.

Conoco is also losing its interest the Corocoro oil field, which will now be 74% controlled by PdVSA with Italy's ENI (ENI) holding a 26% stake.

Exxon's La Ceiba oil field concession will be fully owned by the government, while at the Posa field, China's Petroleum & Chemical Corp (SNP), or Sinopec, will hold 32% stake, local oil firm Ineparia 8%, and PdVSA 60%.

As part of the new deals, the government will also redraw the Orinoco areas that PdVSA will develop with these new partners, the minister said.

Although Conoco and Exxon are ending their presence in the Orinoco projects, talks about other energy projects continue, Venezuelan officials said.

Apart from the heavy oil projects and "the shared profit" oil fields, Conoco is also involved in the Deltana offshore natural gas venture. Conoco has a 50% stake in Deltana's block two.

PdVSA board member Eulogio Del Pino also said Conoco would continue in the Deltana development. He noted that "the fact that they haven't signed here (for the Orinoco projects) doesn't mean they will leave the other projects."

But on Exxon's continued presence in the country, Del Pino said Exxon has no more projects in Venezuela. "I think in Venezuela there are no more projects with Exxon's involvement." Asked if this means Exxon is leaving Venezuela entirely, Del Pino said, "Yes. That's their choice."

In addition to sticky compensation issues, the Orinoco projects also have issued an estimated $1.6 billion in foreign bonds, and have also taken on $2.3 billion in commercial loans.

Ramirez said each company involved in the Orinoco projects will have to "pay its own debts."

Asked if bond holders could call for a technical default, Ramirez added that "what bondholders care about is that the projects continue to produce the 600,000 barrels of oil and that they continue to be sold."

The four Orinoco projects were established in the late 1990s at a cost of about $17 billion, but today have an estimated worth of around $31 billion.

President Hugo Chavez's move to take control of these ventures is part of a nationalization campaign that he launched in early January that included taking over electric utility companies and the country's largest telecom carrier.

The oil rich country is a member of the Organization of Petroleum Exporting Countries, OPEC, and claims to produce 3.3 million barrels of crude a day, a figure many observers dispute. OPEC figures put Venezuelan production at 2.4 million barrels a day.

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