Venezuela rejects BP bid
Reuters reported that Venezuela’s oil ministry turned down a proposal by BP to buy Total’s stake in a promising but inactive natural gas project along the maritime border with Trinidad and Tobago.
BP owns the rights to the Trinidad side of the gas play. It could have used the output from the neighbouring area, the Deltana Platform’s fourth block off Venezuela’s eastern coast, to feed its growing operations on the island.
The rejection highlights how Venezuela’s socialist government, often hostile to foreign companies, remains an obstacle to investment by oil majors in the OPEC nation’s gas reserves to expand their liquefied natural gas (LNG) portfolios.
The ministry claims the area’s reserves needed to be re-estimated, an argument it has used to reject other deals.
The deal had been waiting for approval for two years. France’s Total said in a March filing that the sale of its 49 percent stake was “awaiting approval from the authorities.”
Norway’s Equinor which owns the other 51 percent said it finished exploration drilling 10 years ago, but declined to comment on Total’s plans.
Gas investment could help Venezuela, with the world’s largest crude reserves, compensate for lack of capital for its oil industry, where production continues plummeting amid a political and economic crisis. Venezuela’s undeveloped gas reserves of 225 trillion cubic feet (TCF) at the end of 2017, compares with Trinidad’s 9.2 TCF, according to BP’s Statistical Review of World Energy.
BP and Royal Dutch Shell (RDSa.AS) own stakes in all four of Trinidad’s LNG plants, known as trains. Shell, the world’s largest liquefied gas trader after buying BG Group for $52 billion, is urging Venezuela to let it produce gas in the offshore Dragon field, close to its Hibiscus platform off Trinidad where there is a shortage of gas supply in the downstream industries.
Total’s attempt to sell comes as some Western oil firms seek to shrink their Venezuelan operations as reputational risk grows amid U.S. sanctions and corruption probes linked to government officials and SOC PDVSA.
Shell requested approval this year to sell its only crude asset in Venezuela to French firm Maurel & Prom. Total downgraded Venezuelan projects to the lowest investment category, implying it could continue looking for buyers.
Venezuelan law requires PDVSA to take a majority stake in crude oil joint ventures but is more flexible with gas, allowing foreign firms to individually operate exploration and production licenses. Ownership changes in gas projects are subject to regulatory approval. Government is required to explain rejections.
Under President Chavez, PDVSA tried to control prominent gas projects, including the Deltana and Mariscal Sucre offshore plays, close to Trinidad with total estimated reserves of about 22 TCF. Neither project has begun commercial production due to long delays and disputes over control between PDVSA and private companies. It is difficult for foreign investors to feel comfortable with Venezuelan laws applied in practice. Venezuela lacks financial resources and technical expertise for developing natural gas projects, whereas Trinidad has the expertise and the backing of foreign investors.
While once an afterthought to crude oil, Big Oil is focusing increasingly on natural gas as global demand for less carbon-intensive fuels rises and LNG facilitates international gas trading. Shell and BP are ramping up gas operations in Trinidad, one of the world’s top 10 gas exporters where efforts are under way to reverse the 18 percent decline in gas output in the past decade. A BP gas platform built by U.S. engineering firm McDermott International in Mexico recently set sail to Trinidad.
PDVSA and Trinidad’s SGC NGC signed an agreement in August to allow exports from Dragon into Trinidad, without specifying how to finance the construction of a $1 billion pipeline to transport the gas.
NOT ALONE
Venezuelan law requires PDVSA to take a majority stake in crude oil joint ventures, but is more flexible with gas, allowing foreign firms to individually operate projects through exploration and production licenses.
But ownership changes in gas projects are still subject to regulatory approval, and the government is required to provide an explanation for rejections, said Eugenio Hernández-Bretón, a partner at the Baker McKenzie law firm in Caracas.
Under late socialist President Hugo Chavez, PDVSA tried to take control of prominent gas projects, including the Deltana and Mariscal Sucre offshore plays, both close to Trinidad with total estimated reserves of about 22 TCF. Neither project has yet started commercial production due to long delays stemming from lack of funds and disputes over control between PDVSA and the private companies.
“It is really difficult for a foreign investor to feel comfortable with Venezuelan laws applied in practice,” Hernández-Bretón said.
“We don’t have the financial resources or technical expertise for developing natural gas projects, whereas Trinidad has the expertise and the backing of foreign investors.”
While once an afterthought to crude oil, Big Oil is focusing increasingly on natural gas as global demand for less carbon-intensive fuels rises and LNG facilitates international gas trading.
Both Shell and BP are ramping up gas operations in Trinidad, one of the world’s top 10 gas exporters. Efforts are under way to reverse the island’s 18 percent decline in gas output in the past decade.
A BP gas platform built by U.S. engineering firm McDermott International (MDR.N) in Mexico recently set sail to Trinidad, a McDermott executive told Reuters.
PDVSA and Trinidad’s state gas company signed an agreement in August to allow exports from Dragon into Trinidad, without specifying how to finance the construction of a $1 billion pipeline needed to transport the gas.
(Reporting by Luc Cohen , Marianna Parraga, Alexandra Ulmer , Alexandra Alper , Ron Bousso and Brian Ellsworth)
Venezuela manages to protect Citgo again
(Nov. 26, 2018 4:01 AM ET| By: Yoel Minkoff, SA News Editor )
Venezuela has settled a $1.2B arbitration claim with Crystallex International that will prevent the creditor from stripping away its crown jewel foreign asset, the U.S.-based Citgo Petroleum.
The cash-strapped country has managed to protect the refining business even though it has been crippled by an economic crisis and U.S. sanctions.
Caracas also made payments last month to investors who hold bonds secured by Citgo shares.