Global Insight Perspective | |
Significance | As in the case of conventional crude production, the government's plans to nationalise the country's extra-heavy operations will not totally exclude private investors. |
Implications | Instead, companies such as ExxonMobil, ConocoPhillips, Chevron, Statoil, and Total are being required to allow PDVSA to take at least a 60% stake in the projects, rather than the minority stake the state oil company has at present. |
Outlook | The Orinoco Belt is regarded as an area with considerable untapped potential and, if Venezuela is to see any significant oil-production increase in the coming years, this is where it would be most to likely come from. Venezuela is therefore taking a risk in increasing state control and making terms less favourable for non-conventional oil production. |
President Signs Decree Nationalising Oil Projects in the Orinoco Belt
Venezuela's President Hugo Chávez yesterday signed a decree migrating the strategic association contracts for the Sincor, Cerro Negro, Petrozuata, and Ameriven extra-heavy crude projects in the Orinoco Belt to mixed companies. The decree signed during the President's live TV show Aló Presidente also included the exploration- and production-sharing contracts signed between private companies and PDVSA during the earlier “apertura” or “oil opening phase”. Operating agreements awarded during the same period have already been replaced by mixed companies in which PDVSA has a controlling stake and the replacement of the two other types of contract will represent the completion of the “renationalisation” of the oil sector. President Chávez said "the privatisation of oil has come to an end in Venezuela; this is the true nationalisation of oil". President Chávez also said that "we don't want the companies to leave", but that they will become minority partners, reaffirming the Venezuelan model of nationalisation in which some private participation is still permitted.
President Chávez did not give any further details apart from to say that he would name transition commissions that would raise the Venezuelan flag over all these fields on 1 May, suggesting that the previous deadline for the nationalisation of the four strategic associations in the Orinoco Belt still applies (see Venezuela: 2 February 2007: Venezuela Sets May Deadline for Renegotiation of Extra-Heavy Oil Contracts)
Outlook and Implications
The government has already made its intentions with regard to the strategic associations very clear and the decree appears to be a formality.
The Orinoco Belt is regarded as an area with considerable untapped potential, and, if Venezuela is to see any significant oil-production increase in the coming years, this is where it would be most to likely come from. PDVSA aims to confirm the potential of this area under the “Magna Reserva” project, a project to quantify and certify the reserves in the Orinoco Basin that Venezuela hopes will allow it to incorporate an additional 235 billion barrels of oil by the end of 2008, on top of the country's 80 billion barrels of proved conventional reserves. If confirmed, the total recoverable reserves figure of 315 billion barrels would allow Venezuela to displace several other countries in the ranking of oil reserves and, if Saudi Arabia does not see its own reserves increase, convert Venezuela into the country with the largest volume of reserves in the world.