Venezuela's long-awaited Carabobo heavy oil licensing round in the east of the country has attracted bids from two major consortiums. The level of interest has raised the South American nation's hope of finally attracting large-scale investment in its potentially lucrative upstream segment. While interest in the Carabobo tender appears to have exceeded even Caracas' expectations, the lack of bids from several high-profile registrants in the round - most notably Chinese national oil companies - underlines the growing concerns over Venezuela's stability for foreign firms.
The three tendered Carabobo blocks up for bidding all attracted offers by the January 28 deadline. The bids were logged by the two aforementioned consortiums, headed by US-based industry major Chevron and Spanish-Argentine firm Repsol YPF, respectively.
The Chevron joint venture comprises local oil field services firm Suelopetrol and Japanese firms Mitsubishi, JOGMEC and Inpex. The Repsol-led consortium includes India's state-run Oil & Natural Gas Corporation and Malaysian NOC Petronas.
Under the terms of the latest tender, the successful consortium will have to raise oil production at each block to a minimum of 400,000 barrels per day (bpd). They will also be obliged to finance the estimated $10-20 billion cost of each project themselves. The successful bidder will have until March 2010 to finalise the required 40-60 joint venture with state-run major Petroleos de Venezuela (PdVSA). The bidder will also need to take a final investment decision by the 2010 year-end. Thereafter, the companies will have one year to construct one bitumen upgrader for each of the three designated Carabobo block.
The Carabobo area in the eastern-most part of the Orinoco heavy oil belt contains an estimated 32 billion barrels of reserves - according to the projections of Venezuela's government. Back in 2008 Chavez launched the fist upstream tender in the country since coming to power in the late 1990s, in an attempt to develop the blocks. The round, however, has been delayed several times since owing to the global financial downturn and regulatory issues. Of the seven blocks earmarked for the initial round, only three were actually tendered.
While bids from the likes of Chevron and Repsol bode for the Venezuelan government, the final scope of the Carabobo tender has been well below its initial expectations. Four multibillion barrel blocks appear to have been withdrawn from the auction and of the five reported registered consortia only two actually logged bids.