Venezuela's PDVSA acquires asset from U.S. firm ConocoPhillips

CARACAS, Venezuela, Oct. 5 (UPI) -- Venezuela's PDVSA is acquiring a U.S. energy company's share in an offshore natural gas production platform.

Agencia EFE SA news agency reported Saturday that Venezuela's state-owned hydrocarbon company Petroleos De Venezuela, SA announced that it had acquired U.S. energy firm ConocoPhillips' share in a natural joint gas venture with Chevron Corp.

The offshore natural gas Deltana Platform is located in the Atlantic between the mouth of Venezuela's Orinoco River and the archipelagic nation Trinidad and Tobago in the southern Caribbean.

While PDVSA did not disclose the value of the transaction, the company stated that its acquisition of ConocoPhillips' share in the development project will result in the establishment of a new joint venture to develop the Deltana Platform, with PDVSA having a controlling 61 percent of the new entity and California's Chevron the remaining 39 percent.

PDVSA reported that Deltana Platform's output will be 750 million cubic feet of natural gas per day, which will be shipped via a 186-mile natural gas pipeline to Sucre state's Gran Mariscal de Ayacucho Industrial Complex, currently under construction.

To pay for all the nationalizations?

Venezuela isn't acquiring the Conoco-Phillips interest in a gas production platform. It's aquiring the interest in the Plataforma Deltana Block 2. The transaction was for the book value, which amounted to very little, because there are no facilities, no platforms and no pipelines. The money spent thus far has been to drill a couple of gas wells, and do some engineering studies. Since the purchase value is the book value, I would guess the total payment is about $30 million US.

Now that PDVSA owns the majority of the shares, they have to negotiate a Joint Venture with Chevron, the multinational operator (in other words, Chevron has been doing the work and bills the partners for their share). It's not clear what terms will be required for Chevron to accept the JV terms, but fortunately for them, the investment is relatively low.

on the details it might just get ConocoPhillips off the hook. It sounds like a business decision. There are not enough details given to qualify or judge the decision.

Conoco is contesting the nationalization of their heavy oil properties in arbitration proceedings, which they're likely to win. The gas deal is peanuts, they agreed to do it because it hadn't been nationalized, and Chevron wants to see if they can do a deal now. The development itself is fairly small, if we consider PDVSA will have to foot over 60 % of the bill.

The key question is whether the new JV will include international arbitration clauses. The latest bulletins say PDVSA has now given up on that point, and will allow international arbitration in the new JVs. This will allow the multinationals to take PDVSA into arbitration outside Venezuela.

If they have to ship where is the LNG facility? What is the cost of a LNG facility? Production is fine, but you also have to have distribution. Does ConocoPhillips have natural gas distribution in Venezuela?

My research shows Conoco Phillips sold their interest in Plataforma Deltana Block 2. The questions you ask, you should ask about Chevron, the remaining partner. Where would the gas be sold? I suppose some of it would go to a theoretical LNG facility PDVSA wants to build in Eastern Venezuela. However, they have been talking about this plant for many years, and thus far they have nothing being built. An article I found says they can't get any foreign investors to agree to the terms they want.

I also found an interesting tidbit, Venezuela imports natural gas from Colombia, and they are having a gas shortage. This shortage means they're burning diesel and other liquid fuels to generate electricity. The experts who wrote the report say that, given the gas shortage, a lot of the gas suposedly going to the postulated LNG plant will have to be used in the internal market. Also, they forecast a huge amount of gas will have to be used to produce the heavy oil reserves the government wants to produce. So I don't think Chevron is going to be a happy camper, they're likely to get a low price for the gas and end up losing their shirts.