Venezuela awards exploration risk contracts

Wildcat drilling ahead in Venezuela's rain forest will prove a common sight as foreign operators proceed with exploration and development plans in that country in the wake of Caracas concluding its first E&P risk contract bidding round since nationalization. Photo courtesy Petroleos de Venezuela SA. Venezuela has begun awarding acreage offered earlier this year in the country's first oil and gas bidding round since it reopened to foreign investment in 1993.

July 22, 1996

5 min read

Wildcat drilling ahead in Venezuela's rain forest will prove a common sight as foreign operators proceed with exploration and development plans in that country in the wake of Caracas concluding its first E&P risk contract bidding round since nationalization. Photo courtesy Petroleos de Venezuela SA.

Venezuela has begun awarding acreage offered earlier this year in the country's first oil and gas bidding round since it reopened to foreign investment in 1993.

In all, Venezuela awarded profit sharing contracts (PSCs) covering exploration activity on eight tracts with a combined area of 18,000 sq km.

The PSCs, signed July 10 in Caracas, are expected to require initial investment of $1-2 billion the next 5-9 years. On acreage where operators achieve commercial production, the agreements could be extended for 3 decades or more.

Undiscovered oil resources on the newly assigned areas are estimated at 7-23 billion bbl. State company Petroleos de Venezuela SA (Pdvsa) through its Corp. Venezolana del Petroleo SA (CVP) unit retains the right to acquire as much as 35% interest in areas marked for development.

Among the winning bidders:

A group led by Mobil Exploration & Development Venezuela Inc. won the right to explore La Ceiba block, a hotly contested 445,000 acre tract on the southeastern shore of Lake Maracaibo.
A combine of Enron Oil & Gas Venezuela Ltd. (EOG) and Inelectra SA, one of Venezuela's largest construction and engineering companies, offered the highest bid for the 268,000 acre Gulf of Paria East tract off Venezuela and near Trinidad.
Louisiana Land & Exploration Co. (LL&E), New Orleans, Norcen Energy Resources Ltd., Calgary, and Benton Oil & Gas Co., Oxnard, Calif., received a PSC on Delta Centro block, a 526,000 acre tract in the Orinoco River delta marshlands of Venezuela's Delta Amacuro state.
Other high bidders and their tracts included British Petroleum Co. plc, Amoco Corp., and Maxus Energy Corp. on the Guarapiche block; Conoco Venezuela on the Gulf of Paria West block; Elf Aquitaine and Conoco on Guanare block; Amoco on Punta Pescador block; and Perez Companc on San Carlos block.

La Ceiba plans

Details of the PSCs governing exploration and development on the profit sharing tracts are beginning to emerge.

Mobil and partners Veba Oel and Nippon Oil won rights to explore the La Ceiba tract by committing to a $50 million work program on the concession in the next 31/2 years. The group agreed to collect 2D and 3D seismic data and drill three wildcats to at least 18,000 ft during the period.

Under an accelerated program, the partners expect to begin seismic work in fourth quarter 1996 with the first well to spud early in 1997.

Don R. Voelte, Mobil vice-president of new exploration and producing ventures, noting Venezuela's hydrocarbon potential and well established petroleum industry, said La Ceiba fits well with Mobil's strategic plan to boost production and reserves by expanding operations in Latin America.

La Ceiba operator Mobil holds 50% interest in the tract, Veba 30%, and Nippon 20%.

Paria East concession

EOG and Inelectra agreed to an initial exploration term of 4 years on the Gulf of Paria East block.

The PSC on the acreage requires partners to acquire 300 sq km of 3D seismic data and 1,000 line km of 2D, plus drill two wells. If production is achieved on the acreage, the agreement with CVP could be extended for as long as 35 years.

Previous drilling within the Paria East concession area has confirmed the presence of hydrocarbons on the acreage. Located off the eastern Venezuelan state of Sucre in water as deep as 80 ft, Paria East is adjacent to Trinidad's Soldado field.

EOG or an affiliate is expected to become operator of the tract with 90% interest. Inelectra holds the remaining 10% interest in the concession.

EOG Chairman, Pres., and Chief Executive Officer Forrest E. Hoglund said partners expect to begin acquiring 3D seismic data in fourth quarter 1996.

"On that timetable, we would anticipate drilling prior to the end of next year and could conceivably have production on line by 1998," Hoglund said. "We estimate gross production rates could approach 25,000 b/d following successful development."

Other exploration plans

LL&E, Norcen, and Benton agreed to acquire and process 1,300 km of seismic data on Delta Centro block and drill three wells during a 5 year exploration period. Partners have an option to extend exploration for another 4 years.

The group plans to begin gathering seismic data in fourth quarter 1996 in the southwestern part of the tract, pending approval of environmental permits. Exploratory drilling is to begin in second half 1997.

LL&E and Norcen each hold 35% interest in the acreage and Benton 30%.

On other exploration tracts:

Conoco Venezuela hopes to begin drilling on Guanare block in fourth quarter 1997 and to start production sometime in 1998-99.
BP, operator of the Guarapiche block, said its group expects to spend about $60 million on the tract the next 2-3 years. Exploratory drilling is to begin by fourth quarter 1997.