Eric Watkins
Senior Correspondent
LOS ANGELES, Feb. 1 -- Venezuela will pay $1.1 billion in compensation to StatoilHydro AS and France's Total SA for its nationalization of an oil project they previously controlled.
State-owned Petroleos de Venezuela SA (PDVSA) agreed to pay its partners for their reduced stakes in the Sincor heavy oil venture with a combination of crude oil and cash.
However, Total and StatoilHydro must pay some $130 million of their compensation as a "bonus" to fund the new Sincor joint venture company. After that deduction, Total will receive $735 million in the form of quarterly crude oil shipments, while Statoil will receive $235 million in cash.
President Hugo Chavez's government last May took over majority stakes in heavy oil upgrading projects located along the Orinoco River basin operated by four international oil companies.
While Statoil and Total agreed to remain as minority partners under new arrangements with the government, ConocoPhillips and ExxonMobil Corp. declined to accept the government offer.
PDVSA has not announced any results of its compensation talks with the two US firms, but reports suggest that the Venezuelan firm is exploring all forms of compensation including payment in crude.
Meanwhile, StatoilHydro last week signed an agreement with Venezuela to quantify the reserves of the Junin 10 block in the Orinoco belt with a view to developing them. A local StatoilHydro official said the firm sees enormous reserves potential in the country.
Chavez wants the Orinoco belt reserves certification process completed by 2010. He hopes that certification will boost his country's reserves to more than 300 billion bbl from the current 100 billion bbl.
Regardless of the amount of reserves, however, Orinoco oil will be a boost to the country's output potential and earnings.
Falling outside of the quota system of the Organization of Petroleum Exporting Countries, to which Venezuela belongs, the Orinoco's heavy oil reserves would enable Chavez to ramp up production and sales without the need for any authorization from OPEC.
Contact Eric Watkins at [email protected].
