PdV remains on sidelines of offshore gas venture

OREANDA-NEWS. July 30, 2015. Venezuela first-ever offshore natural gas project remains in foreign hands a month after its launch, highlighting state-owned PdV?s apparent inability to finance its participation.

The \\$5bn Cardon 4 project, jointly operated by Spain Repsol and Italy Eni, is currently producing about 150mn ft3/d (4.2mn m3/d) of gas from the Perla field, with plans to reach 450mn ft3/d at the end of this year. Production is scheduled to ramp up to 800mn ft?/d from 14 wells in mid-2017, and a peak of 1.2bn ft/d from 21-26 wells in 2020.

The shallow water Perla field holds an estimated 16.3 trillion ft3 of gas in place.

Venezuelan energy authorities declined to comment on why PdV has not farmed in. Under Venezuela?s 1999 gas legislation, the company should acquire up to a 35pc stake in gas projects, but this can happen anytime, the energy ministry said.

PdV and ministry officials privately tell Argus that PdV's financial difficulties resulting from sharply lower oil prices since mid-2014 account for the firm?s delay in joining the project.

A preliminary 2014 agreement for Repsol and Eni to loan PdV \\$1bn to finance its entry into the project with a 35pc stake has not materialized. If it does, Repsol and Eni would remain with 32.5pc apiece.

PdV is currently paying Repsol and Eni about \\$3.96/mn Btu for the gas, which is coming ashore with the intention of displacing liquids at the nearby CRP refinery complex and power stations and petrochemical plants in western Venezuela.

A separate export-oriented venture known as Perla 3X to develop the field?s associated condensates, which belong to PdV, has not gotten off the ground yet, Repsol says.

Under another preliminary agreement also signed last year, PdV would lead Perla 3X with a 60pc stake, according to the country?s 2006 oil legislation that caps foreign ownership at 40pc. PdV?s European partners would hold 20pc apiece.

PdV has said the field should produce 24,000 b/d of condensates by 2017, rising to 28,000 b/d by 2020. The energy ministry maintains that discussions with Repsol and Eni on the condensates venture are ongoing.

The 100pc foreign control of Perla, the largest industrial project in Venezuela since the 1990s, stands out against the backdrop of longstanding Venezuelan government policy that is grounded in state control over the economy, particularly natural resources. Late former president Hugo Chavez, the mentor of current president Nicolas Maduro, initiated a wave of expropriations after taking office in 1999, including the 2007 takeover of oil assets formerly owned by ExxonMobil and ConocoPhillips.

PdV financial problems are one dimension of a wider deterioration of the Venezuelan economy, which the International Monetary Fund estimates will contract by 7pc in 2015. Annual inflation has reached triple digits, and the local currency has plummeted in value with respect to the US dollar.