33 oil field contracts facing official review
Posted on Tue, Jan. 25, 2005
Petróleos de Venezuela is reviewing 33 contracts with companies on `a one-by-one basis.'
BY PETER WILSON
Bloomberg News
Venezuela's state oil company, Petróleos de Venezuela, is reviewing 33 contracts with companies including ChevronTexaco Corp. and ConocoPhillips for operating oil fields in the country.
The contracts are being evaluated on ''a one-by-one basis,'' Rafael Ramírez, Venezuela's energy minister and president of Petróleos de Venezuela, told reporters Monday at the presidential palace in Caracas.
The contracts have ''elevated costs'' and aren't beneficial to the country or company, he said.
Asked whether Petróleos de Venezuela might break contracts, Ramírez said, ``We will see what conclusions we will come to.''
The contracts were granted by Petróleos de Venezuela in three auctions in the 1990s for operating fields and developing older tracts for the company. The company is conducting the review three months after unilaterally raising royalties on four heavy oil joint ventures without consulting the partners.
''We're operating within our rights,'' Ramírez said. ''It is our right to improve our company and reduce operating costs.'' He gave no timetable for completion of the review.
One of the companies under review, Houston-based Harvest Natural Resources, suspended drilling in Venezuela last week after its business plan was rejected by Petróleos de Venezuela. Other companies have had their spending programs cut, Ramírez said, without naming them.
''They are going to look at contracts on an individual basis,'' said David Voght, managing director of energy consultant IPD Latin America, which has offices in Caracas and Mexico City. ``This isn't against any company, any group of companies from one country.''
Operators of the 33 ''mature'' fields under review are paid a per-barrel fee for production exceeding the level when they began work.
''These fields produce some of Petróleos de Venezuela's costliest oil,'' Ramírez said. They currently are producing about 500,000 barrels of oil a day, or about a fifth of the country's daily output of 2.6 million barrels a day, he said.
Venezuela said in 2003 that it would ask the holders of the contracts, which also include France's Total SA, Petroleo Brasileiro and China National Petroleum Corp., to convert their operations into joint ventures controlled by Petróleos de Venezuela.
The rules governing the ventures are due to be released shortly by the government, Ramírez said.
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