Venezuela deal for San Cristobal finalised with OVL

Vol 12, PW 2 (12 Jun 08) People & Policy

ONGC Videsh has concluded one of its most significant deals to date.

In the first week of June, PETROWATCH learns OVL signed the â€کSale of Hydrocarbon’ agreement with PDVSA (Petrأ³leos de Venezuela S.A.

) in the Venezuelan capital Caracas to complete its deal for a 40% stake in the 160.16-sq km San Cristobal field in the country’s Orinoco heavy oil belt. “All the other formalities are completed,â€‌ confirms a source.

“This was the only agreement pending.â€‌ Under the â€کSale of Hydrocarbon’ agreement, the JV of OVL (40%) and PDVSA (60%) will sell all San Cristobaloutput back to PDVSA.

“In Venezuela,â€‌ adds a source, “you can not market the crude on your own.â€‌ Still unclear is if PDVSA will pay market rates for the crude or whether it will be benchmarked to local prices.

“I think we will be paid the market price,â€‌ adds OVL. “Details will be clearer when the (Venezuela) government transfers ownership to the new JV.

â€‌ San Cristobal began producing in October 1981 and today produces around 30,000 b/d of heavy 16-degree API crude. OVL envisages more than $300m as its share of investment in the field over 15 years.

Keen to pursue more opportunities, OVL has an office in Caracas since October 2006. “Venezuela has proven reserves of 118bn barrels of oil,â€‌ we hear.

“Some estimates suggest Venezuela holds around 240bn barrels.â€‌ In private OVL staffers close to the deal compliment the Venezuelan government for awarding it San Cristobal on a nomination basis.

“Mr. Chavez (President of Venezuela) is very supportive of India,â€‌ we hear.

“San Cristobal is the best field given to any foreign company in Venezuela.â€‌ Chinese companies are OVL’s biggest competitor in Venezuela, but are less successful.

“Chinese companies have been given smaller fields,â€‌ we hear, “that produce 3000-4000 b/d.â€‌