Venezuela takes over heavy-oil interests from ConocoPhillips

PDVSA will assume ownership of ConocoPhillips's interests in the Petrozuata and Hamaca heavy-oil ventures in Venezuela as well as the offshore Corocoro development project, the US supermajor said June 26.

By OGJ editors
HOUSTON, June 27 -- Petroleos de Venezuela SA (PDVSA) will assume ownership of ConocoPhillips's interests in the Petrozuata and Hamaca heavy-oil ventures in Venezuela as well as the offshore Corocoro development project, the US supermajor said June 26. The Venezuelan state-owned oil firm and ConocoPhillips were unable to reach an agreement regarding ConocoPhillips's migration to an "Empresa Mixta" structure mandated by a Venezuelan decree law.

Negotiations are ongoing between ConocoPhillips and Venezuelan authorities concerning "appropriate compensation" for the company's interests, ConocoPhillips said.

ConocoPhillips said it expects to record a complete impairment of its entire interest in its oil projects in Venezuela of $4.5 billion, before and after tax, in its second-quarter financial results. Although hopeful that the negotiations will be successful, ConocoPhillips has "preserved all legal rights including international arbitration," it said.

Prior to the expropriation of its interests, ConocoPhillips held a 50.1% interest in Petrozuata, a 40% interest in Hamaca, and a 32.5% interest in Corocoro.

At Dec. 31, 2006, ConocoPhillips had recorded 1,088 million boe of proved reserves related to Petrozuata and Hamaca, and first-quarter 2007 production from these two joint ventures—after application of disproportionate Organization of Petroleum Exporting Countries' reductions imposed by the Venezuelan government—averaged 82,000 net b/d of oil. First-quarter 2007 net income attributable to ConocoPhillips's Venezuelan operations was $27 million, the company said.

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