Identifier
Created
Classification
Origin
04CARACAS708
2004-03-02 17:39:00
CONFIDENTIAL
Embassy Caracas
Cable title:  

CHEVRONTEXACO GRANTED SECOND OFF-SHORE GAS BLOCK

Tags:  EPET ECON VE 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L CARACAS 000708 

SIPDIS


NSC FOR TSHANNON AND CBARTON
DEPT OF ENERGY FOR DPHUMPHREY AND ALOCKWOOD

E.O. 12958: DECL: 02/26/2014
TAGS: EPET ECON VE
SUBJECT: CHEVRONTEXACO GRANTED SECOND OFF-SHORE GAS BLOCK

REF: 2003 CARACAS 4142

Classified By: AMB. CHARLES S. SHAPIRO; REASONS 1.4 (B) AND (D)

------
SUMMARY
-------

C O N F I D E N T I A L CARACAS 000708

SIPDIS


NSC FOR TSHANNON AND CBARTON
DEPT OF ENERGY FOR DPHUMPHREY AND ALOCKWOOD

E.O. 12958: DECL: 02/26/2014
TAGS: EPET ECON VE
SUBJECT: CHEVRONTEXACO GRANTED SECOND OFF-SHORE GAS BLOCK

REF: 2003 CARACAS 4142

Classified By: AMB. CHARLES S. SHAPIRO; REASONS 1.4 (B) AND (D)

--------------
SUMMARY
--------------


1. (C) Energy Minister Rafael Ramirez_ announced February 19
the award of Block 3 of the off-shore Deltana Platform
natural gas project to ChevronTexaco. Despite the fact that
ChevronTexaco was the only bidder for the block in December
2003, ChevronTexaco de Venezuela President Ali Moshiri said
he was pleased but surprised. The project was apparently
kept on track as a result of representations to Chavez by
Ramirez_ and PDVSA President Ali Rodriguez despite current
political tensions over the recall referendum on Chavez's
presidency. Moshiri confirmed press reports that
ChevronTexaco expects to begin its drilling program in Block
2 in August and stated bluntly that he believes the Deltana
Platform project is significantly ahead of the Mariscal Sucre
project, the supposed keystone of natural gas development in
Venezuela. A Colombia-Venezuela gas pipeline remains stalled
as a result of GOV military concerns about energy integration
with its neighbor. End Summary.

--------------
BACKGROUND
--------------


2. (SBU) The Deltana Platform is located in waters contiguous
with Venezuela,s maritime border with Trinidad and consists
of 27,000 square kilometers with estimated proven gas
reserves of 20-30 trillion cubic feet. The first two of five
planned blocks in the project were awarded in February 2003
to ChevronTexaco and Norway,s Statoil (Blocks 2 and 4
respectively),in a widely criticized bidding process.
Critics disputed the transparency of a process in which the
GOV designated a short list of preferred bidders. Blocks 3
and 5 were subsequently re-opened for an international
bidding process in September 2003 in which 13 companies
bought bid packages. In early December 2003, ChevronTexaco
was the sole bidder, on Block 3 only, pledging a $5 million
bonus for the block. Block 1 is still outside the bidding
process with the GOV holding talks with BP, which operates
the Kapok field in contiguous Trinidadian waters. Guillermo
Quintero, President of BP Venezuela Holdings, recently told

econoff that progress is being made in this dialogue.


3. (C) The requirements for the first Deltana Platform
bidding round required the winners to take on a minority
partner within 60 days of winning the bid. ChevronTexaco
took on ConocoPhillips (which Moshiri describes as a "passive
partner") as its partner in Block 2. Despite the
requirement, Statoil to date has not taken on a partner for
Block 4. Moshiri speculated that Statoil cannot find a
perspective partner willing to take on a share of the $40
million bid price. According to the terms and conditions of
the Block 2 bidding process, PDVSA may take anywhere from a 1
percent to a 30 percent share of the block once commerciality
is declared. The terms and conditions for the second Deltana
Platform bid round did not require the winner to take on a
partner and Moshiri told econoff in December that
ChevronTexaco would probably plan to operate Block 3 itself.


--------------
AWARD A PLEASANT SURPRISE
--------------


4. (C) In a February 23 meeting, ChevronTexaco de Venezuela
President Ali Moshiri told econoff he was pleased but
surprised the award had been made. Moshiri underlined that
he had not sought to communicate with the Ministry about the
bid during the three-month wait "in order to preserve the
transparency of the process." Another ChevronTexaco employee
confided to econoff February 22 that Moshiri had told him
that Minister Rafael Ramirez_ and PDVSA President Ali
Rodriguez had urged President Chavez to approve the award to
ChevronTexaco despite the current tension in the bilateral
relations between the U.S. and Venezuela. Both Ramirez_ and
Rodriguez are reported to have said that ChevronTexaco has

been scrupulously apolitical.


5. (C) Moshiri confirmed press reports that ChevronTexaco
expects to begin its drilling program in Block 2 in August.
In fact, ChevronTexaco and Statoil will meet the week of
March 1 to discuss sharing a drilling rig. Blocks 2 and 3
will be united into a single operational area which will
benefit from the proximity of the Manatee Field in contiguous
Trinidadian waters in which ChevronTexaco and British Gas
(BG) both have 50 percent equity. Moshiri revealed that
ChevronTexaco has just completed negotiations with BG to take
over operation of the Manatee Field. Moshiri said he
believes the prospects for Block 3 are as good as those for
Block 4 for which Statoil paid $40 million so, laughed
Moshiri, it was cheap at $5 million.

-------------- --------------
DISARRAY IN DEVELOPMENT OF VENEZUELA'S OTHER NATURAL GAS
RESOURCES
-------------- --------------


6. (C) The GOV has planned that the keystone project in the
development of Venezuela,s offshore natural gas resources
would be the so-called Mariscal Sucre project. This project,
which has gone through a number of incarnations over more
than ten years, envisions the construction of a $2 billion
liquefied natural gas plant in Guiria on Venezuela,s Paria
Peninsula. Despite the signature of an MOU by project
partners PDVSA, Shell and Mitsubishi in 2002, progress has
been slow. Although Shell Venezuela President Joaquin
Moreno told econoff on January 28 that he expects a joint
venture agreement will finally be signed in August, other
industry sources in Caracas are skeptical. The financing for
the project may also be problematic. The GOV decided in 2001
that PDVSA would take a 60 percent share in the project.
Given the company's current problems, industry sources have
questioned whether it could come up with the money. The
Venezuelans have offered Qatar a nine percent share of the
project but a local attorney now providing legal services to
PDVSA has told econoff he doubts Qatar will ultimately decide
to come into the project. (Note: In fact, Ali Moshiri told
econoff that, in a February 19 meeting with Minister Ramirez_,
the Minister had delicately asked him if ChevronTexaco would
consider taking Qatar on as a partner in Block 3 of the
Deltana Platform. End Note) Shell has also informed econoff
that it has not yet begun lining up the financing for the
multi-billion dollar project.


7. (C) Ali Moshiri stated bluntly to econoff that he believes
the Deltana Platform project is significantly ahead of the
Mariscal Sucre project. Noting that the Mariscal Sucre
partners have an MOU spelling out the broad outlines of the
business model but no license, Moshiri said that
ChevronTexaco now has a license as well as a development plan
spelling out how it will manage the exploration project and
cost recovery as well as how it will pay sunk costs. "As
soon as we find gas, we can move ahead," he said. When
econoff asked whether the company has the option to take the
gas out through Trinidad, he responded that the parties must
mutually agree to do so. The GOV, he posited, would not
agree. ChevronTexaco itself would move ahead to build the
Guiria facility, he said, "if there is enough gas."


8. (C) Turning to a discussion of his competitors, Moshiri
said the Ministry is disappointed with Shell and Statoil.
Commenting that the Ministry of Energy and Mines "is as much
a political as an energy ministry," Moshiri noted that former
PDVSA President Luis Giusti is on the Shell Board and thus
the current GOV believes Shell is meddling in Venezuelan
politics behind the scenes. Moshiri said the Minister of
Energy and Mines has also been disappointed that Statoil had
not lived up to promises it made when it came into the
Venezuelan market.

--------------
OTHER NATURAL GAS OPTIONS COMING
--------------


9. (C) The Ministry of Energy and Mines has announced that it
will moved ahead this year with a bid round on additional
off-shore exploratory areas in the Gulf of Venezuela and West
Falcon in western Venezuela. Moshiri confirmed that

ChevronTexaco will also take a close look at these blocks,
particularly as they are located close to the company's
Venezuelan home base in Maracaibo.

--------------
COLOMBIA-VENEZUELA GAS PIPELINE
--------------


10. (C) Moshiri said he expects to meet with Colombian
President Uribe and Colombian Energy Minister Luis Ernesto
during their visit to Caracas for the G-15 Summit. Moshiri,
whose regional responsibilities also cover Colombia, is
trying to push ahead on an MOU between Venezuela and Colombia
to allow development of a cross border gas pipeline to carry
Colombian gas to Venezuela. Despite the fact that the gas is
desperately needed in western Venezuela for injection into
oil wells as well as commercial and other industrial uses,
Moshiri said ideology is driving the business and the
Venezuelan military is saying "no" to the pipeline. Finally,
Moshiri noted that both Venezuelan Energy Minister Rafael
Ramirez_ and Colombian Minister Luis Ernesto have told him
they are proud of what they have done to stop the leakage of
subsidized Venezuelan gasoline into Colombia.

--------------
COMMENT
--------------


11. (C) ChevronTexaco was the only bidder on Block 3 and it
would, perhaps, have been embarrassing for the GOV to reject
the bid. But the bottom line is that, through deft handling,
ChevronTexaco has managed to maintain an excellent
relationship with the GOV and is expanding its opportunities
in Venezuela.
SHAPIRO


NNNN

2004CARACA00708 - CONFIDENTIAL