Pdvsa, Petrobras to form binational company

July 5, 1999
Petrobras de Venezuela SA and Petroleos Brasileiro SA have signed a letter of intent covering the joint development of downstream and upstream energy projects in Venezuela and Brazil.

Petroleos de Venezuela SA and Petroleos Brasileiro SA have signed a letter of intent covering the joint development of downstream and upstream energy projects in Venezuela and Brazil.

The accord, signed by Pdvsa Vice- Pres. Hector Ciavaldini and Petrobras Pres. Henri Philippe Reichstul, would lead to the creation of a binational company called Petroamerica. The plan`s biggest proponent, Venezuelan President Hugo Ch vez, sees this as another step toward full energy integration across Latin America. Currently, energy integration is a key focus of the Mercosur trading pact involving the so-called Southern Cone nations of South America, including Brazil.

The agreement covers four main areas of energy operations:

  • Sale and distribution of Venezuelan and Brazilian hydrocarbons. The work will begin with Orimulsion-Pdvsa`s proprietary boiler fuel that is an emulsion of extra-heavy crude from Venezuela`s Orinoco oil belt, water, and a surfactant-to be used in power plants in Brazil.
  • Analysis of prospects for joint hydroelectric projects in Venezuela and Brazil.
  • Identification of opportunities for refining and marketing in third countries products based on Venezuelan and Brazilian crude oil.
  • Joint exploration and production of oil and natural gas in Venezuela and Brazil.


Venezuelan President Hugo Ch vez told OGJ that "The Petroamerica proposal might (later) include Mexico, Colombia, and Ecuador to kick off energy integration in Latin America through the creation of a transnational company."

Venezuelan Mines and Energy Minister Al! Rodr!guez Araque told OGJ that the accord might lead to the construction of a refinery strategically located in the Caribbean Sea that would facilitate marketing of refined products to the U.S., currently the biggest importer of Venezuelan crude oil and products.

Petroamerica will be a new company with Venezuelan and Brazilian capital. President Ch vez also said that the success of Petroamerica depends upon the political will of the Brazilian and Venezuelan governments, which he feels is there.

Respective statuses

Brazil`s Mines and Energy Minister Rodolpho Tourinho noted that Vene- zuela has enormous oil and gas reserves and that Brazil`s energy demand is expected to grow at an average rate of 4%/year in the next 10 years.

Under its current Organization of Petroleum Exporting Countries quota, Venezuela produces 2.708 million b/d of crude oil against productive capacity of about 3.8 million b/d, but plans call for hiking its productive capacity to 5.8 million b/d within 10 years, Ciavaldini told OGJ.

He also said that Venezuela has invited Brazil to participate in exploration and production of vast natural gas reserves in the Cristobal Colon and Delta regions of Venezuela.

Brazil produces around 1.2 million b/d of crude oil but has proven oil and gas reserves of 17 billion boe, while Venezuela`s proven crude oil reserves alone total 74 billion bbl, in addition to a vast heavy oil resource in the Orinoco belt.

While Venezuela is an exporter of crude, Brazil still imports about 600,000 b/d, some of it from Venezuela.

Following the accord`s signing, a working group comprising officials from both firms has until yearend to provide technical details about Petro- america`s structure.

The group will also be looking into technology exchange programs between the two firms.

Tourinho noted that the recent demise of the Petrobras petroleum monopoly in Brazil was a positive factor in the two state companies reaching the accord.

The letter of intent was signed at the end of a 2-day summit in Rio de Janeiro held between heads of state from the Latin American-Caribbean region and the European Union that was aimed at laying the groundwork for negotiating future trade accords.