On 23 December Spain's biggest oil firm Repsol YPF, S.A. and Italy’s Ente Nazionale Idrocarburi S.p.A., better known by the acronym ENI, signed a $1.5 billion deal with state-owned oil company Petroleos de Venezuela SA, (PDVSA) to develop a huge new gas reserve in Venezuela. Repsol YPF, S.A. Chairman Antonio Brufau, ENI S.p.A. Chairman Paolo Scaroni and Venezuelan Minister for Oil and Mining Rafael Ramirez signed the agreement in Caracas.
According to a statement released by Repsol YPF, S.A., Perla (the pearl) field is 31 miles off Venezuela’s coast in the Cardon IV block of the Gulf of Venezuela in 200 feet of water and holds 17 trillion cubic meters of natural gas, equivalent to 3.0 billion barrels of oil. Repsol YPF, S.A.’s recent pronouncement is more than double the estimate it gave three months ago when it first announced the initial results of its test drilling. The Perla field was discovered in 1976 and in 2009 the partners began initial exploratory activities to estimate the field’s reserves. Four test wells have now been drilled.
While Repsol YPF, S.A and Eni S.p.A. each hold a 50 percent stake in the Cardon IV block in which Perla is located, the roughly 12.7 square mile Perla field will be developed by consortium of Repsol YPF, S.A., which will own 32.5 percent of the joint venture, the same as ENI, while PDVSA will retain a 35 percent stake. Phase I of Perla’s development is set to cost $1.4 billion.
ENI issued a statement noting, “Following the execution of the gas sales agreement, Cardon IV will proceed to the final investment decision for Phase I, which includes the utilization of the wells already drilled and the installation of light offshore platforms linked through a gas pipeline to a central processing facility located onshore. Phase I has an estimated cost of $1.4 billion, incorporating some of the investment necessary for subsequent phases (mainly for pipeline and platforms). Phase II and III will require additional drilling from the platforms installed in Phase I, and the expansion of the CPF processing capacity.”
Minister Ramirez said on state television that the contract is “very important because it gives us the economic signal for the development of the project. We’ve reached a price that allows us to bring those volumes of gas here, that will allow the bidders to be able to do all the contracting and the infrastructure to bring the gas to the mainland as soon as possible.”
PDVSA commented in a press release that the company will pay $3.69 per million British thermal units for gas from Perla, which is expected to come onstream by the first half of 2013. The natural gas sales agreement will be in place until 2036.
Quite aside from the revenue stream that the project will generate, it will end Venezuela’s dependence on natural gas imports, since, as currently production lags behind demand, Caracas is forced to import natural gas from Colombia.
Ramirez said at the company’s headquarters La Campina, that "these contracts are helping build the elements we have been announcing to the country, nothing more than exploiting our huge gas wealth. Our gas Revolution has helped identify a very important base of resources, in addition to developing the entire architecture to play a major role in the primary energy matrix to turn Venezuela into an exporter,” adding that Venezuela’s proven gas reserves of 195.96 billion cubic feet place it among the world’s top eight nations in terms of confirmed natural gas reserves.
According to estimates, Perla’s Cordon IV Bloc yield by 2013 is expected to reach 300 million cubic feet per day, may rise to 800 million by 2016 and is expected to reach 1.2 billion cubic feet per day by 2019.
What’s wrong with this picture?
The fact that the U.S. has once again shot itself in the foot in developing Western Hemisphere energy assets by pursuing a political vendetta against Venezuelan President Hugo Chavez. Four months ago the Organization of Petroleum Exporting Countries, a notoriously conservative organization, has stated that Venezuela has world’s largest oil reserves, even exceeding those of OPEC’s top producer, Saudi Arabia.
Way to go, Washington.
By. John C.K. Daly of Oilprice.com