Carabobo tender facing reports of delays, conflicts

By
Friday, March 6, 2009

Venezuela's Carabobo tender for seven new heavy crude blocks in the Orinoco belt could be facing trouble as reports of delays and conflicts between bidding firms and the country's oil ministry emerge.

"There was a big meeting or confrontation between the bidding IOCs and the minister on March 5," an industry source told BNamericas, adding that companies told the ministry that they could not accept the current terms of the tender because of market conditions.

"The threat, implied or explicit, is that they would not bid if he did not make some concessions on the three main conditions for bidders including financing, percentage of recovery and the final destination of the oil," the source added.

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Venezuela's state oil company PDVSA said in December that 19 companies had purchased the US$2mn data package for the round.

Besides creating JVs to operate the seven new blocks, the round also calls for the construction of three new heavy crude upgraders in the Soledad municipality of Anzoátegui state with capacities around 200,000b/d.

Offers were to have been due on April 16, but the oil industry has been expecting delays.

"There has been nothing official, but the ministry has been telling companies they are at least a month behind schedule," another source said, adding that the ministry had been slow in answering questions and offering guidelines.

The February 15 referendum could have also slowed down the process as government officials and PDVSA employees focused on campaigning for a Chávez victory.

Financing has long been expected to pay a big role in the tender process.

While PDVSA will require at least a 60% stake in any JVs formed from the tender process, the company will ask JV partners to finance at least 30% of its share.

Aggressive bidders could theoretically offer to finance for more than 30% of PDVSA's 60% stake.

Many industry analysts have said that the collapse in oil prices could give participating companies some room to negotiate with both the oil ministry and PDVSA.

NORWAY'S PERSPECTIVE

The Norwegian embassy in Caracas, meanwhile, confirmed in an article on its website that StatoilHydro (NYSE: STO) would participate but said the tender had been delayed by two or three weeks.

The company already has a 9.67% stake in the Petrocedeño JV in Venezuela.

"This is the first international tender for new blocks in more than 10 years," the embassy said in the article. "It includes three enormous projects valued from US$15-20bn."

"StatoilHydro is currently conducting technical and economic evaluations of the tender, and its current stake in Petrocedeño should prepare it well for the analysis," the embassy added.

StatoilHydro still is participating in the round, a company spokesperson told BNamericas.

"We are focused on further growth in Venezuela and a further expansion of StatoilHydro business in the country fits very well with company strategy," the spokesperson added, declining to comment on the embassy statement or the timing of the tender.

The Norwegian embassy later told BNamericas that it could not confirm delays to the tender and had removed the statement from its website.

"The embassy cannot confirm that there will be delays to the Carabobo tender," the embassy spokesperson said. "This part of the article is the result of an unfortunate misunderstanding between the embassy and its source. We are sorry to have caused confusion."

NO RISK OF COLLAPSE

Many analysts, however, said the tender would ultimately go through because of its sheer importance to the industry.

"I don't think the Carabobo tender is at risk of collapsing," Gianna Bern, an energy analyst and president of Chicago's Brookshire Advisory and Research, said.

"For PDVSA, the Carabobo tender is of strategic importance and a critical part of the company's publicly stated longer term strategic plan. Like most tenders, they are extremely complex and all subject to varying levels of negotiations," she said.

"However, I do think the economics of the current oil environment will prompt bidders to open discussion to items not previously under consideration."

Spokespersons for Venezuela's oil ministry were not immediately available for comment when contacted by BNamericas.

Other companies that purchased the data package for the round include: British oil major BP (NYSE: BP); California-based Chevron (NYSE: CVX); China's CNPC and Sinopec; Colombia's Ecopetrol (NYSE: EC); Italy's Eni (NYSE: ENI); Portugal's Galp; Japanese firms Inpex, Jogmec and Mitsubishi; India's ONGC; Brazil's Petrobras (NYSE: PBR); Malaysia's Petronas; France's Total (NYSE: TOT); a Russian consortium of unspecified companies; and Venezuelan firm Suelopetrol.