Venezuela OKs Chevron's Deltana Gas Extraction

CARACAS (Dow Jones), Apr. 8, 2010

Chevron Corp. secured Venezuela's approval to develop natural gas from an ambitious offshore project, a new step in the company's growing presence in a country that is being shunned by some of the world's biggest oil companies.

A decree published on Thursday's edition of the Official Gazette allows Chevron to extract and sell natural gas from Block 2 of the Plataforma Deltana gas project, which has 7 trillion cubic feet of proven gas reserves.

The project is also being developed by other firms including Russia's OAO Gazprom and France's Total S.A.

San Ramon, Calif.-based Chevron controls Blocks 2 and 3 in the Deltana project through a joint venture with the natural gas branch of state oil company Petroleos de Venezuela S.A., or PdVSA. Chevron has a 39% stake in the project. The Official Gazette said the block will start producing in 2013.

Neither Chevron nor PdVSA immediately responded to requests for comment.

The approval underscores Chevron's strategy of adapting to the changes enacted in recent years by the Venezuelan government--instead of resisting them.

Chevron is the sole U.S. major oil company to remain in Venezuela, after Exxon Mobil Corp. and ConocoPhillips left the country in 2007 when the Venezuelan government took control of a majority stake in heavy oil projects in the Orinoco belt. Both Exxon and Conoco started arbitration proceedings against the country. Like Chevron, Total SA and some other international companies also stayed.

In February, Chevron led a team of oil companies that won one of the new heavy oil projects awarded in the Carabobo auction, a development which could cost the company nearly $15 billion. Most of the world's largest oil companies didn't participate in the round despite the region's promising hydrocarbons bounty, in part because of the nationalizations and legal controversies they have endured in Venezuela in recent years.

The Deltana Block 2 was originally assigned to ConocoPhilips, which last year returned its shares in exploration and exploitation rights to PdVSA.

Venezuela claims 181 trillion cubic feet of proven natural gas reserves.

Copyright (c) 2010 Dow Jones & Company, Inc.