Chevron consortium wins Venezuelan oil block

A consortium of companies led by Californian oil major Chevron has been awarded a Venezuelan oil block following the countryÔÇÖs long-awaited Carabobo oil auction.  The auction, which the Venezuelan government is hoping will help boost the countryÔÇÖs dwindling production levels, was the biggest bidding process in 11 years.  The Chevron-led consortium, which included Mitsubishi and Inpex of Japan, was awarded the Carabobo 3 block. The consortium paid $500 million for drilling rights to the block and a further $1 billion for financing to the state-run oil firm Petroleos de Venezuela SA (PDVSA).  A consortium that included Spain's Repsol, India's Oil & Natural Gas Corp., Malaysia's Petroliam Nasional and two other Indian firms was awarded the Carabobo 1 block.  The third block being auctioned, Carabobo 2, wasnÔÇÖt assigned.  All three blocks are located in the oil-rich Orinoco region of eastern Venezuela, approximately 65 kilometers to the north-east of the city of Puerto Ordaz.  The blocks have a combined area of 557 square kilometers and are expected to produce at least 400,000 barrels a day each when developed. Together, they will require investments of $15 billion.  Early production could begin at Carabobo 1 and 2 in a of couple years; however, peak production won't be reached for around five years.  Both winning consortiums will enter into an arrangement with PDVSA, in which PDVSA will hold 60 percent and the consortium 40 percent.  In the Chevron-led consortium, San Ramon, California-based Chevron will hold a 34 percent stake, while the Japanese firms it is partnering with will share five percent between them. The other one percent will be held by Suleopetrol, a Venezuelan firm.  "We look forward to being part of this new opportunity that will expand development of one of the world's largest known hydrocarbon resources," said Chevron vice chairman George Kirkland, commenting on the deal.  Ali Moshiri, president of Chevron Africa and Latin America Exploration and Production Co., added: "Chevron's growing presence in Latin America's resource-rich basins highlights the company's ability to fully integrate our experience and technology into the successful development of large, complex projects."  The consortiums are each expected to build upgraders that can refine the crude found in the blocks. Each upgrader could cost $6.5 billion.  Chevron is a heavy oil producer with operations in Brazil, California, Indonesia, the North Sea and the Partitioned Zone between Saudi Arabia and Kuwait.  In Venezuela, Chevron already holds joint venture interests in PetroPiar, an integrated extra-heavy oil project in the Faja; PetroBoscan and PetroIndependiente; and natural gas blocks Plataforma Deltana 2 and 3.  It also holds an interest in Venezuela's first liquefied natural gas project, which is currently under evaluation, as well as operating the offshore Cardon III block north of Lake Maracaibo in the Gulf of Venezuela.  VenezuelaÔÇÖs president Hugo Chavez has said he wants to increase foreign investment into the country, adding that its massive amounts of reserves are a big pull for the oil majors. Crude oil in Venezuela currently accounts for 93 percent of the countryÔÇÖs exports.