Mike Oduniyi
18 January 2005
Lagos — Venezuela has stepped up a campaign to strike deals with foreign state-run oil companies, including the Nigerian National Petroleum Corporation (NNPC), following disagreements with private oil majors that have operated in the country for years.
Last week a 15-person delegation from the Iranian oil ministry is in the country, looking for opportunities in the natural gas and petrochemicals industry.
Next week a Venezuelan delegation will travel to Qatar for more talks on natural gas. An NNPC delegation may also visit the country seeking to strike a deal on behalf of the Nigerian Petroleum Development Company (NPDC), the crude oil exploration unit of the NNPC.
According to Venezuela's Oil Minister Rafael Ramirez, years of talks with other state-managed oil firms, in particular from other Organization of Petroleum Exporting Countries (OPEC) will bear fruit shortly.
"We want to formalize joint projects, for example in the (natural) gas field with Qatar we are very advanced, and now we are beginning conversations with Iran," Ramirez said this week.
President Hugo Chavez, has been looking to strike joint oil projects with other OPEC nations ever since he entered office in 1999.
In 2000, when Venezuela hosted the second OPEC presidential summit in 40 years, Chavez called for closer economic cooperation between member countries.
Chavez envisions a "multi-polar" world free of U.S. political, economic and military dominance. Late last year he traveled to Iran, Russia, Qatar, Libya and China to expand energy relations.
While Venezuelan officials accelerate talks with oil states, PdVSA is at loggerheads with U.S.-based ConocoPhillips (COP) over a plan to develop the Corocoro oil field off the eastern cost of the country.
Ramirez attributed the dispute to changes in ConocoPhillips' business plan for the area but sources close to the project say Venezuela is pressing the Texas company to buy more locally produced supplies, a request the company soundly rejects.
ConocoPhillips, which did not return calls seeking comment, is not the only firm stuck in a Venezuelan rut. Royal Dutch/Shell Group has failed to get a $2.7 billion offshore natural gas project, known as Mariscal Sucre, off the ground due to a standoff over who will control the project. The Venezuelan government is insisting on a majority stake in the venture, but industry sources say the Netherlands-controlled company is unwilling to forego a lead position.
State-run Petroleos de Venezuela (PVZ.YY), or PdVSA, needs help to bring oil production back to where it was before a devastating two-month strike two years ago. It also must resolve a domestic natural gas deficit before it can hike output significantly, because the oil industry needs natural gas to run facilities and maintain pressure in oil reservoirs.
By halting drilling at Corocoro, Venezuela is making it harder to reach its goal of 5 million barrels in daily output by 2009.
"Corocoro's output would have produced an important production buffer to possibly weaker oil prices in 2006," CreditSuisse First Boston analyst Jan Dehn wrote in a report Wednesday. According to market estimates, Venezuela is pumping around 2.6 million barrels a day, lower than its OPEC quota and official estimates of more than 3 million b/d. Corocoro was set to produce 70,000 b/d starting in 2006. But it's also clear that Venezuela's government hopes to strike new deals with companies more willing to go along with higher tax rates and partnership structures dominated by PdVSA, two main features of the 2001 hydrocarbons law drafted under Chavez.
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