MSG063G/01E COMMODITIES-VENEZUELA: Oil Risk Contracts Liberalised

CARACAS, Dic 01 (IPS) - Foreseen risk contracts between Venezuela Petroleum (PDVSA) and transnationals for oil exploration are to include variable privileges, and exclude state participation in the company to be created if oil is discovered.

Before sending the plan to Congress, the government is putting the finishing touches on the contract that will serve as a basis for bidding, which PDVSA hopes to begin finalising in March.

The Venezuela daily "Economy Today" reported Thursday that a variable privilege ranging from 78 to 85 percent - depending on the profitability of each field - had finally been accepted. Firms will bid on renewable 29-year contracts.

It was hoped that the Ministers' Council would vote Wednesday in favour of the primary contract in order to avoid case-by-case negotiations. However, the issue has been postponed for one week.

Some 250 companies from all over the world hope to participate in the Venezuelan petroleum industry, which has been closed to foreign investment since it was nationalised in 1976.

PDVSA President Luis Giusti has said bidding would begin with 12 fields chosen from among those containing more than 500 million barrels each, and with a 35 percent recovery rate, which is generally considered high.

The system chosen by PDVSA is one of shared benefits but not production, and excludes the state from participating in the business that will be formed if petroleum is discovered.

Control is to be in the hands of a committee led by a PDVSA directorate, with influence in essential aspects of the association.

Venezuela has more than 30 fields with deep, high-risk deposits, each potentially holding more than 300 million barrels.

PDVSA calculated that during the exploratoration phase - lasting up to nine years - each contract would bring in investments of between 50 and 70 million dollars, while total investment in new petroleum fields will total some 10 billion in 10 years.

Analysts estimate that the risk contracts will result in between 400,000 and 800,000 barrels a day, but the primary agreement states that extraction must be adapted to Organisation of Petroleum Exporting Countries' (OPEC) quotas.

PDVSA hopes to expand its production potential if the supply from other OPEC members and independent producers declines, allowing Venezuela to provide a greater proportion of the world's petroleum supply.

© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service