Venezuela State Oil Co. and Italy's ENI sign biggest energy deal ever

PDVSA and ENI Sign Biggest Venezuela-Italy Energy Deal Ever

By JAMES SUGGETT - VENEZUELANALYSIS.COM 11/24/2010

Mérida, November 24th 2010 (Venezuelanalysis.com) – With a total investment of US$17 billion, Venezuela’s state oil company, PDVSA, and the Italian energy company ENI created two new mixed enterprises on Monday to extract and refine oil from Venezuela’s Orinoco Oil Belt.

Sources from both companies said the deal was the largest ever signed between Italy and Venezuela. In accordance with Venezuela’s policy of “oil sovereignty,” PDVSA will retain a 60% share of each company, while ENI will control the remaining 40%.

With an investment of US$8 billion, the mixed company Petrojunin will extract oil from the Junin 5 block of the Orinoco Oil Belt. The companies expect production to begin with 70,000 barrels per day in 2012 and increase to 240,000 barrels per day once operations are fully developed in subsequent years.

The other company, Petrobicentenaria, will invest US$9 billion to build a refinery in Anzoátegui state, which is located north of the Orinoco River. The refinery is expected to be completed by 2016 and to have a 350,000 barrel per day capacity. According to the PDVSA website, the refinery will be supplied with crude from the Junin 5 block and will produce diesel fuel, gasoline, and other petroleum products for both domestic use and export.

As part of the 25-year deal, ENI agreed to invest in local community development projects and to invest US$2 billion in a 900-megawatt power plant. Venezuela faced an electricity shortage last year amid rapidly growing demand and a drought that reduced hydroelectric production at the nation’s largest dam.

The government estimates that the Orinoco Oil Belt may contain a total of 316 billion barrels of crude oil, while the U.S. Geological Survey estimated earlier this year that the Orinoco Oil Belt may contain 513 billion barrels of recoverable crude.

ENI is also a minority partner along with Spain’s Repsol in a joint natural gas drilling project with PDVSA in the Perla (“Pearl”) gas reserve, located in the Gulf of Paria, adjacent to the mouth of the Orinoco River.

PDVSA says that the gas reserves at the Perla well are estimated at 15 trillion cubic feet. Venezuela’s total natural gas reserves are estimated at 185 trillion cubic feet, the largest in any Latin American country and the ninth largest worldwide. Venezuela plans to initially use the gas to satisfy its growing domestic demand, and later utilize the resource for export.

During a press conference with Venezuelan Oil and Energy Minister Rafael Ramirez on Monday, ENI Chief Executive Paolo Scaroni said Venezuela “is going to be a truly strategic country for our development.” He said the OPEC member nation may become ENI’s second most important trading partner within five years. ENI is active in more than 70 nations according to the company website.

“I am convinced that today we have established the basis for a great alliance between Italy’s ENI and PDVSA. We have arrived at a fundamental point in our development program in Venezuela,” said Scaroni.

Ramirez said the deals with ENI constituted a step forward for a “pluri-polar world,” which Venezuela seeks to construct by diversifying its energy partners in Asia, the Middle East, Europe, Africa, and Latin America.

PDVSA was nationalized in 1976 but its management and many of its operations were gradually re-privatized throughout the 1980s and 1990s. The government led by President Hugo Chavez re-nationalized the company by writing state ownership of PDVSA into the constitution and by forcing all foreign oil companies to become minority partners of PDVSA in 2007.

While ENI and more than two dozen other companies from more than 20 countries signed onto the mixed enterprises in the Orinoco over the last three years, the US-based ConocoPhillips and ExxonMobil refused. The companies sought World Bank arbitration and demanded $US20 billion and US$7 billion, respectively, in compensation for nationalized assets. Ramirez and other Venezuelan officials have rejected the demands as too high, and said they expect to receive favorable arbitration rulings by 2012.

The government estimates that its exploitation of the Orinoco Oil Belt will increase national oil production from three million to more than five million barrels per day and generate billions of dollars in state revenue to be invested in public education, health care, the domestic manufacturing sector, and other areas of “public interest,” in accordance with the nation's constitution.

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Oh, no! The Chavez government is proving Milton Friedman and all the rightwingers and Wall Street shills WRONG. A socialist government, asserting principles of sovereignty and the requirement that resources benefit social programs, CAN and IS attracting huge investment--in this case, the Italian company ENI, plus "two dozen other companies from more than 20 countries," to develop the Orinoco Belt.

Exxon Mobil, eat your greedy, murderous, coupmongering hearts out!

Venezuela has twice the oil of Saudi Arabia (according to the USGS) and 60% of the profits are going to benefit the people who live there!

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Edited to add the date of the article.

This has been an astonishing time for the poor of Venezuela. The scum are determined to reverse this progress, but in the end, they will lose. The interests of the human race are more important than a few criminals raking excess profits for themselves, and using the poor as cheap labor to protect the oligarchs from hard work.

Very best wishes for the new leftist, peoples' governments. They will struggle, but they will win, in the end.

Milton Friedman. You unbearable ass. You have brought hideous suffering to people who are your betters in every way.

:kick: :kick: :kick: :kick: