Russians to Pay $600MM, Not $1B, to Start Venezuela Oil Drilling



CARACAS (Dow Jones), Oct. 6, 2009

A Russian oil consortium will only have to pay $600 million, not the $1 billion Venezuela previously said, as a down payment for its participation in exploiting Venezuela's Orinoco oil fields, a top lawmaker indicated Tuesday.

A group of five Russian firms -- OAO Rosneft (ROSN.RS), Lukoil (LKOH.RS), OAO Gazprom (GAZP.RS), TNK-BP and OAO Surgutneftegaz (SNGS.RS) -- are planning a joint venture with state energy firm Petroleos de Venezuela to develop the Junin 6 block in eastern Venezuela.

President Hugo Chavez and other administration officials said last month the Russian firms already paid a $1 billion bond to have access to the oil block, which officials say has huge proven reserves and could produce 450,000 barrels of crude a day.

But in a statement Tuesday, Angel Rodriguez, a senior Venezuelan lawmaker and head of the congressional energy commission, said the $1 billion bond will be paid 10 days after the joint venture is finalized. He also said Venezuela would shoulder $400 million of that, with the Russians paying the other $600 million.

Officials have estimated an overall investment of anywhere between $14 billion and $26 billion will be needed to develop the Junin 6 block.

Rodriguez did not indicate when the joint venture deal would be finalized. The $1 billion would go toward the building of highways, schools, housing and other social or infrastructure projects, he said.

PdVSA would control 60% of the joint venture, with the Russians owning the other 40%.

The Chavez-led government has talked about plans for nearly $70 billion in oil investments over the coming years as this oil-rich nation seeks to ramp up dwindling production numbers and boost its sagging economy.

But so far, nearly all those plans are based only on memorandums of understanding, with no solid investment commitments from foreign oil companies.

Lower global oil prices amid a weak worldwide economy may be one reason for less-enthusiastic foreign oil investment in Venezuela. An uncertain regulatory environment in this Socialist-leaning country is seen as another cause.  

Copyright (c) 2009 Dow Jones & Company, Inc.


RELATED COMPANIES
Company: Lukoil more info
 - Lukoil Taps SNC-Lavalin for Iraq Contract (Sep 06)
 - Lukoil Reports 20% Rise In 2Q Profit On Stronger Oil, Weaker Rouble (Aug 29)
 - Romania Closes One Case Against Russia's Lukoil, Related Trial Still On (Nov 17)
Company: OAO Gazprom more info
 - Gazprom's Second Quarter Profit Soars On Rising Energy Prices, Sales (Aug 29)
 - Russian Gas Exports Hit a New Summertime Record (Jul 17)
 - Trump: US to Compete With Russia for Europe Gas Market (Jul 16)
Company: Rosneft more info
 - Ifax: ExxonMobil Sees Russian LNG Plant's Capacity At 6.2MM T/Year (Jun 07)
 - Russia State Oil Firm Starts Drilling At New Well Offshore Vietnam (May 15)
 - Rosneft Appeals to Market With $2 Billion Buyback, Debt Cut (May 01)
Company: PDVSA more info
 - Documents: Venezuela Resumes Domestic Crude Exports To Cuba (Sep 13)
 - Documents: Venezuela's PDVSA To Reopen Damaged Port Dock By Month's End (Sep 12)
 - Venezuelan Crude Sales To US Fell In August On Port Interruptions (Sep 04)
Company: Surgutneftegas more info
 - Russia's Surgut to Launch Shpilman Oil Field (Sep 03)
 - Minister: Asian Firms To Replace Western Energy Majors If They Leave Russia (Sep 22)
 - Russians to Pay $600MM, Not $1B, to Start Venezuela Oil Drilling (Oct 06)
Company: TNK-BP more info
 - Rosneft Board Member Rejects Criticism of TNK-BP Buyout (Oct 04)
 - Rosneft: TNK-BP Integration 'Mostly Complete' (Jun 20)
 - TNK-BP Acquisition Boosts Rosneft's 1Q Production (Apr 30)