VENEZUELA: IRAN'S PETROPARS FRUSTRATED IN CARACAS

C O N F I D E N T I A L CARACAS 001352 SIPDIS ENERGY FOR ALOCKWOOD AND LEINSTEIN, DOE/EIA FOR MCLINE HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR MKACZMAREK COMMERCE FOR 4332/MAC/WH/JLAO NSC FOR DRESTREPO AND LROSSELLO E.O. 12958: DECL: 10/19/2019 TAGS: EPET EINV ENRG ECON VE IR SUBJECT: VENEZUELA: IRAN'S PETROPARS FRUSTRATED IN CARACAS REF: CARACAS 1296 Classified By: Economic Counselor Darnall Steuart, for reasons 1.4 (b) and (d). ¶1. (C) SUMMARY: Iran's PetroPars is reportedly frustrated by its inability to move petroleum projects forward in Venezuela, especially the development of Ayacucho block 7 in the Faja heavy oil belt. END SUMMARY. ¶2. (C) XXXXXXXXXXXX told Petroleum Attache (PetAtt) on October 15 that PetroPars is frustrated with the lack of progress in developing a petroleum joint venture (JV) in the Ayacucho block 7 of the Faja heavy oil belt. (NOTE: In March 2008, PDVSA announced the results from a PDVSA-PetroPars certification and quantification program in Ayacucho 7, estimating 31.2 billion barrels of oil in place with reserves of 6.24 billion barrels. END NOTE.) According to conversations XXXXXXXXXXXX had with PetroPars' GM, the Iranian oil company is operating with minimal staff. PetroPars' GM told XXXXXXXXXXXX that he had repatriated to Iran his entire technical staff (nine in total) due to a lack of activity in Venezuela. Additionally, the GM himself now spends three out of four weeks in Iran, residing at most, one week per month in Caracas. PetroPars maintains three Venezuelan permanent staff in Caracas ) an attorney, a receptionist, and an office maid. ¶3. (C) Oil sector consultant XXXXXXXXXXXX, told PetAtt on October 18 that Iran's PetroPars petroleum company &has no future in Venezuela.8 Dagher claimed that PDVSA asked PetroPars to contribute $220 million for a refinery project (NFI),but that PetroPars could not raise that amount. Consequently, he said, PDVSA is not moving forward with PetroPars to develop Ayacucho 7. ¶4. (C) According to the media, during President Chavez's August 2009 visit to Tehran, the GOI and the GBRV signed two complementary memoranda of understanding that appear to constitute an even swap. The MOUs called for (1) Iran to provide $760 million in energy investment in Venezuela to develop the mature oil field Dobukubi and Ayacucho 7 block and (2) Venezuela to provide $760 million to finance 10 per cent of phase two of the Iranian South Pars field project. A well-connected petroleum industry expert believes that $760 million might be sufficient to develop Dobukubi, but is not enough for Ayacucho 7. XXXXXXXXXXXX commented that Dobukubi "is a jewel" and that China's Sinopec oil company has been trying to negotiate a deal to develop it. ¶5. (C) COMMENT: Iran might have expected that the relationship between President Chavez and President Ahmadinejad would produce tangible economic benefits in the exploration and production of crude oil. Apparently, shutout of Ayacucho 7 due to its inability to contribute $220 million to a refinery project and with a $760 million price tag to move forward in Dobukubi, it appears to be unlikely that PetroPars will undertake any significant new activity in Venezuela. END COMMENT. DUDDY