Luis E. Giusti, OTC keynote speaker and president of Petroleos de Venezuela SA (Pdvsa), predicted Venezuela will get a lot busier upstream and downstream.
Giusti told a press conference following his OTC keynote address he expects the government to approve agreements that will permit private companies to form joint ventures (JVs) with Pdvsa to search for light oil. The search will focus on 10 blocks in the eastern, central, and western parts of the country to be released for this purpose.
The first JV contracts, to be awarded by fourth quarter 1995, will allow Pdvsa to retain as much as a 35% interest. Giusti described the 10 blocks to be offered as "the best in Venezuela's portfolio."
He said major parties in the government support the move to private participation in production, a fact unclear because dissidents are getting the most coverage in the popular press. Operating agreements that allow private companies to rejuvenate marginal fields in Venezuela are already active.
Giusti said Pdvsa and partners Exxon Corp. and Mitsubishi are doing basic engineering design and defining reserves for a liquefied natural gas (LNG) plant.
About 11-12 tcf are needed for the project, which would not be economical under present gas prices in the U.S. and Europe, both potential markets. According to group estimates, gas would have to sell for $2.40/MMBTU for the LNG project to break even. Current prices are estimated at $1.40/MMBTU.
Plans are for Pdvsa to start building the liquefaction plant in 1996, but the price of gas at that time will have to be more than the breakeven price. If the price outlook is still bleak, the project will be shelved, Giusti said.
It is a different story in petrochemicals.
Giusti said Venezuela is enjoying the fruits of major investments made in the past 10 years, much of it during the tough down cycle in petrochemicals. A recently commissioned joint venture methanol plant will pay out in only 1% years because the product price has shot up so high, he said.
Giusti pointed out that private industry can build wholly owned olefin plants in Venezuela and is not restricted to participation in derivatives. However, no private olefin plants has been built in Venezuela because the government controls the transfer price of olefin feedstock.
"We are urgently defining that policy with the Ministry of Energy & Mines," Giusti said. "In a couple of months we are going to bring forward a proposal."
Once that proposal is in place, Giusti said he expected a great deal more private investment in petrochemicals, particularly in eastern Venezuela where there will be large volumes of associated gas.
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