Statoil, Total Lose Grip on Venezuelan Block

CARACAS (Dow Jones), Jan. 22, 2010

Venezuela's Oil Ministry said Thursday it has ended efforts to work with France's Total (TOT) or Norway's Statoil ASA (STO) to develop an extra-heavy crude block in the eastern Orinoco region.

Efforts to develop the Junin 10 block have been underway since 2007, and the ministry says the block could produce 300,000 barrels a day of crude. There were also plans to build an upgrader there to refine the tar-like crude into a lighter, more marketable grade.

The plan was for Total or Statoil, or both together, to develop the field in a joint venture with Venezuelan state oil firm PDVSA, with PDVSA retaining majority control.

But according to the ministry, "The proposals presented by the companies Statoil and Total didn't meet the required conditions."

As such, the ministry said it has "instructed PDVSA to develop the block on its own."

Officials at Statoil and Total weren't immediately available for comment.

The announcement comes just one week before Venezuela's Jan. 28 Carabobo drilling auction, where seven promising blocks are up for bidding. Registration has ended, and several top oil companies are expected to participate.

Both Total and Statoil have expressed interest in the Carabobo auction over the past year, but it wasn't clear whether they would take part in next week's bidding process.

Hopes are high that a successful Carabobo auction could give a much-needed boost to Venezuela's oil production output over the coming years. But analysts say many companies could be reluctant to commit too much money while the global economy remains fragile.

Oil Minister Rafael Ramirez confirmed Thursday that at least two consortiums registered for the auction.

Ramirez also said that Venezuela continues to explore for natural gas in offshore areas that are part of the Mariscal Sucre project.

"We are developing it ourselves, 100%, and it's going well," he said in a ministry statement.

He added the ministry received offers from companies interested in taking part in the Mariscal Sucre project, but said they were rejected when they didn't meet expectations.

Meanwhile, Ramirez also mentioned a planned refinery in China that would be built as a joint venture between China and Venezuela. He said the estimated cost for its construction would be $6 billion, and said Venezuela would cover 40% of that.

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