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Harvest Natural Resources signs natural gas contract with PDVSA for Uracoa field's production

By OGJ editors

HOUSTON, Sept. 26 -- Houston-based Harvest Natural Resources Inc. (HNR) announced a contract to sell natural gas to Venezuela's state oil firm Petroleos de Venezuela SA, accelerating development of Uracoa field in eastern Venezuela.

Formerly Benton Oil & Gas Co., HNR has been involved with the South Monagas unit for 10 years since it won rights to participate in Venezuela's marginal field reactivation program (OGJ, June 29, 1992, p. 40). Uracoa field has produced oil for years, but there was no market for the natural gas until now.

HNR Pres. and CEO Peter J. Hill said, "We are the first US independent oil and gas company to participate in the emerging Venezuela domestic natural gas market. . .This natural gas contract will also allow us to lower overall unit operating costs due to a higher product throughput and the elimination of expenses associated with reinjection and other natural gas handling costs. . .We will be able to efficiently accelerate oil production without concern for producing excess natural gas."

Uracoa field is in the south-central portion of the state of Monagas, about 10 km southeast of Temblador, 40 km southwest of Tucupita, and 125 km southeast of Maturin (OGJ, July 31, 2000, p. 35).

PDVSA's contract is with HNR's 80%-owned subsidiary Benton-Vinccler CA, Maturin, Venezuela. Starting in the fourth quarter of 2003, gas will be sold to PDVSA primary for industrial use by aluminum and concrete plants, a Harvest Natural Resources spokesman said.

Terms calls for the delivery of up to 198 bcf of natural gas through July 2012 for $1.03 Mcf. This contract prompted HNR's independent petroleum engineer to add 198 bcf of gas reserves to Benton-Vinccler's proved reserves. For HNR, this is a net addition of 158 bcf.

HNR plans an initial capital investment of $25 million in 2003 to build a 54 mile pipeline to deliver the natural gas to a PDVSA pipeline, modify the Uracoa field processing plant, and provide other infrastructure.

The company also expects to invest an additional $21 million starting in 2004 for a natural gas pipeline, infrastructure, and drilling in Bombal field to sustain the gas production profile through the end of the contract.

Gas sales are expected to start at a rate of 40-50 MMcfd in fourth quarter of 2003 and gradually increase to 70 MMcfd in 12-18 months. Initial gas production will come from Uracoa field where 100 wells have been drilled through the natural gas cap.

The field is producing 40 MMcfd of associated gas that is being reinjected. Additional oil production initially will come from the 10-12 oil wells in Uracoa field that are presently shut-in because of their high gas-to-oil ratio. Harvest Natural Resources expects to increase oil production by drilling infill wells.

Production of the gas cap is projected to provide incremental oil volumes. As a result of this expected increase, Harvest Natural Resources agreed to sell 4.5 million bbl of oil to PDVSA at a price of $7/bbl during the gas contract's duration.


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