Petrobras Pulls Out of Venezuela Mariscal Sucre Plan

RIO DE JANEIRO Nov 13, 2007 (Dow Jones Newswires)

Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, is pulling out of plans for the development of the Mariscal Sucre natural gas project in Venezuela, Chief Executive Sergio Gabrielli said Tuesday.

After analyzing the project, Petrobras came to the conclusion that it was of no advantage to the company, Gabrielli said in an interview in Rome, his press officer told Dow Jones Newswires over the telephone from Italy.

Petrobras and Venezuelan state-oil firm Petroleos de Venezuela SA, or PdVSA, had planned to jointly develop the project, which according to Petrobras was slated to cost between $2.5 billion and $3 billion. But the two companies had never signed a binding agreement on Mariscal.

Gabrielli didn't tell why exactly Petrobras was pulling out of the project.

But Petrobras International Director Nestor Cervero in September said Petrobras and PdVSA had "different ideas about the destination of gas sales."

While the Brazilian firm favored selling most gas from Mariscal as liquefied natural gas, PdVSA favored selling natural gas in its domestic market in Venezuela. Domestically sold gas is likely to fetch a far lower price than LNG sold in international markets.

The pullout of the Mariscal Sucre project is not related to Petrobras' estimate last week that its ultra-deep Tupi field in Brazil's Santos Basin contains up to 8 billion barrels of oil equivalent, or BOE, in oil and gas, Gabrielli's press officer said.

PdVSA had said it expects production from Mariscal Sucre to start in late 2010, but that timetable will be difficult to keep given the current state of planning, Petrobras Cervero had said in September.

Output from Mariscal Sucre initially should be about 18 million cubic meters of gas a day, Petrobras had said.

Petrobras and PdVSA, meanwhile, remain jointly in plans to build a new heavy oil refinery in Brazil's northeast in which PdVSA is slated to take a 40% stake, Petrobras Chief Financial Officer Almir Barbassa said in a conference call on third quarter earnings Tuesday.

Petrobras and PdVSA so far haven't signed any firm deal on the heavy oil refinery. Petrobras nevertheless in September started ground work at the 200,000-barrel-a-day refinery.

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