Japan, Venezuela agree on oil, gas developments

Japan and Venezuela have agreed to investments of $33.5 billion to develop oil and gas projects in Venezuela for Japanese markets.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 8 -- Japan and Venezuela, following meetings in Tokyo between Venezuelan President Hugo Chavez and Japanese Prime Minister Taro Aso, have agreed to investments of $33.5 billion to develop oil and gas projects in Venezuela for Japanese markets.

"Japan needs oil. Venezuela wants to diversify its market. Japan is ideal for us," Chavez said, adding that the two countries plan to cooperate in 12 projects altogether over the next 5 years, including one of $8 billion on a block in the Orinoco belt.
Chavez said he wants to supply Japan "in the future" with 1 million b/d of oil—about one third of the South American nation's current oil production, according to official figures.

Among the agreements, Venezuela's state-owned Petroleos de Venezuela SA (PDVSA) and Japan's Inpex Corp.; Mitsubishi Corp.; and Japan Oil, Gas, and Metals National Corp. agreed to a 2-year study to determine the precise reserves of the Junin 11 Block and the cost of extracting its oil.

Venezuela says Junin 11 Block is confirmed to hold 35 billion bbl of oil, with reserves of 6 billion bbl and a long-term expected production level of 200,000 b/d.

PDVSA also signed a memorandum of understanding (MOU) with Japanese trading houses Mitsubishi, Mitsui, Itochu, and Marubeni for the development of natural gas fields in the offshore Proyecto Mariscal Sucre region, which is dedicated to Venezuela's first LNG train.

"With this group as a Japanese consortium, we aim to spend the next one month analyzing data provided by Venezuela, with a view to making a development proposal," said Seiji Kato, executive vice-president and chief executive officer of Mitsubishi's energy business group.

"As the region seems to have confirmed massive gas reserves, it may take us more than one month to analyze the data," Kato told journalists in Tokyo.

PDVSA holds a 60% stake in the gas fields, and the remaining 40% will be shared by other stakeholders, possibly Qatar Petroleum (QP) and a selection of Japanese companies, according to Venezuelan Energy Minister Rafael Ramirez.

A variety of partners have signed up for the $12 billion LNG project, which would be comprised of two 4.7-million tonnes/year gas liquefaction plants.

Train 1 partners include PDVSA 60%, Portugal's Galp Energia (GALP) 15%, Chevron 10%, QP 10%, and a Mitsui-Mitsubishi joint venture 5%. Train 2 partners include PDVSA 60%, GALP 15%, Enarsa of Argentina 10%, a joint venture of Mitsubishi and Mitsui 5%, and Itochu 10%.

State-owned Japan Bank for International Cooperation (formerly the Export-Import Bank of Japan) signed an MOU to consider lending PDVSA $1.5 billion to fund expansion of its 140,000 b/d El Palito and 200,000 b/d Puerto La Cruz refineries. Japanese trading houses Mitsubishi Corp. and Itochu also pledged $750 million for each refinery.

PDVSA also signed an MOU with Marubeni to jointly study different financing possibilities for industrial facilities, which could be installed near the extra-heavy oil upgraders in Carabobo and Junin blocks in Venezuela's Orinoco belt.

Japan and Venezuela also have created a $4 billion investment fund, which would be part of a larger package of investment in oil, petrochemicals, and LNG production.

On a visit to Tokyo in March, Ramirez met with Japan's Economy, Trade, and Industry Minister Toshihiro Nikai and signed a memorandum aimed at deepening their cooperation in the area of energy development (OGJ Online, Mar. 20, 2009).

Contact Eric Watkins at hippalus@yahoo.com.

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