Venezuela awarded on Wednesday the largest oil investment of Venezuelan President Hugo Chavez’s 11-year rule, drawing tens of billions of dollars of much-needed foreign finance to the Orinoco Belt just three years after the leftist leader nationalized operations there.
US-based Chevron and Spain’s Repsol led groups that looked beyond the risks of operating in Venezuela to tap into the OPEC member’s 100-plus billion barrels of reserves, a sign that oil giants need to replenish crude reserves that are increasingly under control of producer nations.
The results show victories for both sides. Oil companies agreed to tough conditions laid down by Caracas, while Venezuela softened fiscal terms in another sign resource nationalism around the world has been weakened by falling oil prices.
“This international investment is absolutely necessary for us, we could not develop the Orinoco Belt alone,” Chavez told oil company officials during a ceremony in the Miraflores presidential palace.
“This is mutually beneficial. You are here because you need to be here. These are relationships of equals, of friendship,” said the president, who has nationalized many of the South American nation’s industries in a drive to socialism.
Chavez, known for his jocular manner and combative anti-US politics, spent several minutes lambasting US President Barack Obama, even requesting that Chevron’s regional chief help Venezuela improve ties with Washington.
“Maybe Obama will come to the Orinoco Belt, bring him,” Chavez said.
Venezuela’s oil production has fallen below 2.5 million barrels per day (bpd) from more than 3 million bpd in 2001, the US Department of Energy says, principally because of limited oil-field investment and lack of qualified personnel.
Petroleos de Venezuela’s (PDVSA) own official statistics show output above 3 million bpd, though those numbers have been flat for five years. The company has twice in the last five years pared down aggressive production increases.
Repsol will take 11 percent in its project, the same stake as consortium partners Petronas of Malaysia and ONCC of India. State oil firm PDVSA will take 60 percent, with two other Indian companies taking the remainder, a Repsol official said.
Chevron will lead a second project along with consortium partners that include Japan’s Mitsubishi and Inpex, plus Venezuela’s Suelopetrol.
The government did not receive offers for a third project and did not receive bids from several companies Chavez has openly courted, including China’s CNPC and Russian firms such as Lukoil and Gazprom.
This may be in part because Venezuela is running a parallel process of direct adjudication for blocks in the Junin area of the Orinoco belt.
Venezuela holds the world’s fifth-largest oil reserves at an estimated 100 billion barrels, according to the BP Statistical Review. The Venezuelan government says it holds at least 210 billion barrels that could yet be produced and last month the US Geological Survey released a study that reached a similar conclusion.
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