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LATINPETROLEUM
Since 2000 • Electronic Subscription • US $125 Per Year
Issue 07.2006, Volume 7, Issue No. 55
Mexico Reforms Mining Law
Energy Ministers from 12 Latin American
Regions Confirm Attendance at the FIER
Sales of Petroleum Products in Mexico
Reach Almost Ps137 Billion Pesos
PEMEX: Petrochemical Production
Up 7.4% In June 2006
PEMEX assumes LPG fleet cost
with the closing of San Juan duct
PETROLEOS MEXICANOS
Trying To Reduce Petroleum Product Thefts
PEMEX Signs Agreement To Support
Battle Against Fuel Thefts
PEMEX Detects 91 Illicit
Thefts Along Pipeline Network
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CONTENTS
VOLUME 7 ● JULY 2006 (ISSUE 07.2006) ● ISSUE NUMBER 55
18 Baker Energy Wins Logistics Asset
EVENTS
6-7 Events calendar
ENERGY WRAP
8-11 Heard On The Street, Executive
Suite, Top Financial, Top Economic,
Accidents, Top Quotes.
UPDATES
Mexico, Central America
and the Caribbean
14 PetroCaribe Partners End Up Paying
Almost 40% Of Crude Cost
14 Chevron Announces Successful
Delivery of First Natural Gas from
Dolphin Deep Field Offshore Trinidad
and Tobago
15
Nicaragua Government Not
Guarantying Import of Venezuelan Oil
15 The Guatemalan Government
Announces It Has Potential to Produce
Petroleum
15 Infinity Engages Advisor to Explore
Options for Nicaragua Concessions
16
Management Contract
30 Aker Yards to construct large
vessel for DOF ASA
19
31
19
31 Petrobras reports oil in the new
frontier area offshore Brazil
PEMEX says restoration work
reaches 85% completion mark at La
Venta No. 215 well
Banamex: Mexican oil price to
average $55 per barrel in 2006
19
PEMEX assumes LPG fleet cost
with the closing of San Juan duct
19
Mexico issues decree That Reforms
the Regulations Of Law That Regulates
Constitutional Article 27 On Matters Of
Petroleum, As Well As The Mining Law
MEXICO PRODUCTION
(OIL AND GAS) TRACKER
21-22 Monthly production tracker
Keppel FELS/Technip Completes
Hardest Part of P-52 FPU Construction
31 Altantia Offshore receives letters of
intent for orders in Brazil
32
Petrobras becomes first Latin
American Company on the United
Nations Global Compact Committee
UPDATES
Other Andean
33 PDVSA initiates
activities in Bolivia
33 YPFB: “Brazil Ambassador’s
affirmation as bad message”
ENERGY
PANORAMA
25-26
Exploration and production
highlights from Mexico to the Southern
Cone regions of South America.
Midstream, downstream, seismic, mining
and metals, steel, electricity, power,
waste, technology and other updates.
34
Repsol-YPF, Petrbras accused of
altering measuring controls in audited
fields
34 Bolivia to respect the Hydrocarbon
Law when making distributions
Energy Minister from 12 Latin
American Regions Confirm Their
Attendance at the FIER
UPDATES
16
29
16 PEMEX Detects 91 Illicit Thefts
along Pipeline Network
29
Weatherford Wins Drill Pipe Riser
Contract from Petrobras
34
17
PEMEX Strengthens Its Efforts to
Improve Fuel Quality
29 Petrobras awards drilling contract
to Scorpion/Queiroz
35
17
29
PEMEX Reports Production of
1,340 MMcf/d In The Burgos Basin
PEMEX Signs Agreement
Support Battle against Fuel Thefts
to
Petrobras approves shipyard hiring
to build a dry dock
Aker Kvaerner Wins Two-Year
Frame Agreement
30
18
30
PEMEX: Petrochemical Production
Up 7.4% In June 2006
Sales of Petroleum Products In
Mexico Reach Almost Ps137Bn Pesos
34 The future of Bolivia’s mining
sector to be debated
Brazil
18
PIFCo Announced
Buyback Tender Offer
Securities
Petrobras Charters $35.5mm PSV
contracts
exploration
34
Equipo de Servicios Petroleros
awarded national and regional excellence
awards
Colombian-Venezuelan pipeline
construction begins July 8, 2006
Guajira region to receive $9.3mm
for social investment projects
35
Colombia to adjust ruling for the
sale of Venezuelan gasoline
35 Petrobank closes Petrominerales
initial public offering
35 Petrobank recommences drilling on
the Orito block in Colombia
4
36
Colombia’s ANH signed six (6)
E&P contracts in June 2006
36
PetroEcuador calls for tender for
NAPO crude oil
36
Ecuador rejects PDVSA’s refining
41 March Resources Receives
Independent Report on Chilean Project
46 Officials demand 35% increase in
the price of domestic gas cylinders
42
FOGL to Conduct Survey in
Falkland Basins
46 PetroCanada
SENIAT
42 ParaFin Corporation is negotiating
46 Baker Energy de Venezuela
Conducts Heavy Oil Workshop
offer
with several groups to secure funding for
the Alto Parana Farmout Agreement
37
42
Ecuador temporarily reduces fuel
shipments
37
Uruguay and Brazil study possible
expansion of refinery
On The Cover
plant
47
Petrobras to spud San Carlos well
during the latter part of 2006
47 Shell Lubricantes looking
increase lubricant sales in 2006
37 Politechnical (Espol) looks to
explore for more petroleum in Ancón
to
48
Shell evaluates new investment
opportunities in Venezuela
38 Occidental Reclasses Ecuador as
Discontinued Operations
48 Venezuela’s National Assembly
approve name changes to three (3) mixed
companies (JVs)
38 EnCana: Ecuador indemnity with
Andes Petroleum Company
39 Plectrum, Gold Oil Invited to Enter
by
47 LukOil joins AVHI’s elite list
Ecuador to get 6MW hydroelectric
38 Chevron gets a court win in US
sanctioned
British Petroleum’s Thunder Horse.
Source: British Petroleum Company.
48 Private Company Social Investments
Insufficient or Sufficient?
49 La Electricidad de Caracas shares
now traded in Latibex
Negotiations for Offshore Peru Block
UPDATES
39 Repsol-YPF
stations in Peru
43 4Sight Technologies Expands Into
Latin America
49 Tesoro Corporation interested in
buying CITGO refinery
43
BRAZIL PRODUCTION
(OIL AND GAS) TRACKER
acquires
Mobil
39
Venezuela
Pluspetrol prepares to drill initial
well at Lot 56
Medoro
Resources
closes
acquisition of Venezuelan properties
40
43
IFT establishes
distribution
relationship for Western South America
40
UPDATES
Other Southern Cone
Telefónica Móviles to Deploy Plug
Power Fuel Cells In Venezuela
44
Chevron Corporation, CVP sign
JV contract for Boscán field
50-51 Monthly production tracker
COLOMBIA BID ROUND
52 Bid Round Summary
FITCH DOWNGRADE
40
44
53-57 Fitch Downgrades Venezuela’s
Heavy Oil projects
40
44 Shell Venezuela, CVP sign new JV
M&A TRACKER
Antrim moving ahead with Tierra
del Fuego plan
Chevron Corporation, CVP sign
JV contract for LL-652 field
High energy prices to affect
commerce in the South Cone
contract for Urdaneta West field
40
Construction of Eva Perón ship for
PDVSA to begin in Argentina
45 Baripetrol and Petrowarao
complete conversion process
41
45
41
45 CITGO announces realignment of
retail gasoline network
Uruguay, Argentina sign agreement
with Venezuela to explore the Faja
Bachelet insists she will not lower
combustible tax
Spread between WTI
Venezuela Crude Narrows
and
59-60 M&A and Divestitures
RIG DATA BOARD
61
International rotary rig counts –
Tables by nation
62
International rotary rig counts –
Graphs by main nations
5
EVENTS
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EVENT: REGIONAL ENERGY
INTEGRATION FORUM 2006 (FIER)
Date: Sep.6-8.2006
City: Mexico City, Mexico
Venue: Hotel Sheraton Maria Isabel
Organizer: Latin American Energy
Organization (OLADE)
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EVENT: STCIC EXPORTING
ENERGY SERVICES WORKSHOP
Date: Aug.9.2006
City: Port of Spain, Trinidad & Tobago
Venue: Cara Suites, Claxton Bay
Organizer: STCIC
Contact: Kevin Ramnarine
Visit the LatinPetroleum Booth at FIER.
Tel: 1.868.652.5613
Date: Sep.11-14.2006
City: Rio de Janeiro, Brazil
Venue: Riocentro
Organizer: IBP (Organization)
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Email: kevin@southchamber.org
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Translations/Editing
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EVENT: BRAZIL GAS AND POWER
ROUNDTABLE
Date: Aug.23.2006
City: Rio de Janeiro, Brazil
Venue: Hotel JW Marriott
Contact: Jeremy Martin, Director, Energy
Program
Tel.: 55.21.2545.6500
EVENT: SECOND BRAZILIAN
SYMPOSIUM ON PETROLEUM
BIOTECHNOLOGY, OLD AND NEW
ENERGY
Venue: Auditório da Reitoria/UFRN, Natal,
RN-Brasil
Date: Sep.25-29.2006
Organizer: CROB-LBMG,
CB/Universidade Federal do Rio Grande
do Norte
Contact: Dr. Carlos A. G. Blaha
6
Tel: 55.84.3211.9209
Tel: 55.84.9481.7815
E-mail: info_bspb@biocomp.ufrn.br
URL: http://www.biocomp.ufrn.br/bspb
Subscribe online
EVENT: ECUADOR OIL & POWER
Venue: The George R. Brown Convention
Center
Organizers: PennWell
Date: Sep.26-29.2006
City: Quito, Ecuador
Organizers: HJ Becdach Markteting Inc.
URL: www.deepoffshoretechnology.com
Email: feriashj@uio.satnet.net
Email: hbecdach@uio.satnet.net
URL: www.feriashjbecdach.com
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Tel: 55.11.3017.6878
Fax: 55.11.3017.6912
Email: energia@ibcbrasil.com.br
URL:
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EVENT: PETROLEUM EXHIBIT OF
MEXICO (PEM) TABASCO
Date: Nov.7-9.2006
City: Villahermosa, Mexico
Venue: Parque Tabasco
Organizer: International Exhibitions, Inc.
Contact: Sandy Basler
Tel.: .1.713.529.1616
Fax.: 1.713.821.1169
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EVENT: ETHANOL SUMMIT 2006
Date: Nov.30.2006-Dec.1.2006
City: Houston, Texas USA
Venue: The Westin Oaks
Organizer: Intertech-Pira
Contact: Christine Groff, Conference
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Tel.: 1.207.781.9617
Fax.: 1.207.781.2150
Email: cgroff@intertechusa.com
URL: http://www.intertechusa.com
URL: www.oilonline.com/mexico
EVENT: II COLOMBIA OIL & GAS
INVESTMENT CONFERENCE
EVENT: OIL AND SUSTAINABLE
DEVELOPMENT
Date: Dec.3-5.2006
City: Cartagena, Colombia
Venue: TBA
Organizer: Colombia’s Hydrocarbon
Agency (ANH)
Date: Nov.14-15.2006
City: London UK
Organizer: CWC Group
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Venue: Crowne Plaza
Organizer: IBC Energy
Date: Nov.28-30.2006
City: Houston, Texas (USA)
URL: www.ibcenergy.com
7
ADVERTISEMENT
8
‘HEARD ON THE
STREET’
ARGENTINA. A resolution issued by
Argentina’s Energy Secretariat selected
ENARSA, Argentina’s state energy
company, to be in charge of overseeing the
collection of geological, production and
reserves data by oil companies and federal
and provincial authorities.
Enarsa, which was created in 2004 to help
increase hydrocarbon investment in the
sector, will administer the database once it
is compiled.
ARGENTINA. The president of RepsolYPF, Antonio Brufau, announced that his
company is considering transferring its
assets in Latin America, not including the
liquefied natural gas assets, to its Argentine
branch, YPF.
“We are currently valuing the assets and
studying the implications of their transfer,”
said Brufau during an analyst conference in
Madrid.
Brufau stressed the unless Repsol-YPF
could convince the market of the true value
of YPF and its Latin American assets, it
would move forward with a decision to
remove the shares of the affiliate from the
stock market until the market recognized its
value.
Brufau added a decision would be taken in
the next 3-4 months.
Brufau also added that the Latin American
assets in question do not include those
assets located in Trinidad and Tobago or
Venezuela.
BERMUDA. French oil distributor Rubis
SA announced it is in talks to buy Shell’s
marketing business interests in the North
Atlantic island of Bermuda.
BOLIVIA. The Bolivian government
announced it will compensate Brazil’s
state-oil company, Petrobras, for the
nationalization of two of the Brazilian
company’s refineries, according to Jorge
Alvarado. Bolivia announced it would
compensate Petrobras once it concludes its
financial evaluation of the two refineries.
“An evaluation of the assets needs to be
completed so that Bolivia can compensate
Petrobras,” according to Brazilian president
Luiz Inácio Lula da Silva. “That’s what we
want to happen.”
For its part, the Bolivian government has
agreed to “pay the price” for the
nationalization of the two refineries
owned by Petrobras.
According to president of Bolivia’s state
oil company, Yacimientos Petrolíferos
Fiscales Bolivianos (YPFB), any
agreement must include a “reconciliation
of accounts” since Petrobras bought the
refineries and later took control of the
pipelines and fuels that were not
including in the original transaction.
Petrobras bought the two refineries in
1999 for $100mm.
The nationalization decree approved by
president Evo Morales in May.2006
forced Petrobras to give up 51% of its
refining assets to YPFB.
feasibility of developing bio-fuels such as
ethanol and bio-diesel from crops and non
conventional renewable sources. The
companies expect to have the JV
operational by early-2007.
CHILE. Codelco, the world’s biggest
copper mining company, could have its
local debt rating cut one level by Standard
& Poor’s as the Chilean company’s
liabilities continue to grow.
Codelco’s A+ rating could be reduced
while its foreign debt rating is stable at A,
according to statements from S&P.
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BRAZIL. Various work groups from
Venezuela and Brazil will met again in
Rio de Janeiro, Brazil on Aug.14.2006 to
review supply aspects related to the
development of the first stage of the
Great Gas Pipeline of South America,
specifically related to the resources of
natural gas available in Venezuela.
During the first phase of the project,
Venezuela hopes to send by 2012 about
50 million cubic meters of gas from
Güiria, Sucre state to Fortaleza, Brazil,
according Eulogio of the Pino, the
president of the Venezuelan Petroleum
Corporation (CVP by its Spanish
abbreviation).
The various work groups will discuss the
methodologies to be used to measure the
Venezuelan natural gas resources located
onshore and offshore.
Coming Also In August 2006
Del Pino assured that 100% of the
volumes would come from natural gas
projects to be developed offshore
Venezuela.
COLOMBIA. Officials with Colombia’s
Ecopetrol announced the company was
interested in studying the possibility of
entering into exploration and production
activities in Venezuela.
CARIBBEAN. Venezuela’s state oil
company Petroleos de Venezuela
(PDVSA) is studying the construction of
a storage facility complex to be located in
Antigua and Barbuda as part of its
PetroCaribe initiative. PDVSA also
announced it may form a JV with the
government of St. Kitts and Nevis to
distribute petroleum products on the
island.
“First we need to speak with Venezuela’s
Minister of Energy and Mines, Rafael
Ramirez regarding the possibility of an
agreement that would allow us to develop
specific projects, then we can identify these
projects,” according to Ecopetrol President,
Ysaac Yanovich. “We would be very
interested in working together with
Petroleos de Venezuela (PDVSA).”
CHILE. Chile’s government owned
petroleum company, ENAP, and Iansa, a
Chilean sugar mill, will jointly study the
US $125 Per Year
Ecopetrol announced it plans to work with
PDVSA to reactivate the operation of the
Guajira field located offshore Colombia.
9
COLOMBIA. The Colombia government
announced it will privatize up to 20% of
state oil firm Ecopetrol in a move to attract
much needed foreign investment to the
nation’s hydrocarbon industry. However,
the government announced it would prefer
to sell the interest to Colombian pension
and employee funds.
Colombian oil production reached a peak of
820 Mb/d in 1999 and has 538.7 Mb/d in
May.2006.
ECUADOR. Ecuadorian Foreign Minister
Francisco Carrion announced Malaysia is
interested in investing in the nation’s oil
industry. Both nations recently signed
economic, scientific, technical and cultural
cooperation agreement.
ECUADOR. Officials from Ecuador and
Colombia signed an energy cooperation
agreement whereby the Andean nations
would form a strategic alliance. Per the
agreement, the nation’s state oil companies,
PetroEcuador and Ecopetrol, respectively,
will form JVs in order to facilitate
agreements as they relate to exploration and
refining, along with the production,
transportation, storage, and sale of
petroleum products.
MEXICO.
Mexico
is
challenging
Venezuela’s plan to supply the Central
American and Caribbean regions with
petroleum products as the nation has
announced plans to construct a $6.3bn
refinery. The refinery, to be located in
Central America, would process crude oil
from Mexico and would offered the
petroleum products to the same Central
American nations PetroCaribe wants to
serve.
MEXICO. Mexico’s Energy Secretariat
announced the governments of Mexico, the
USA, and Canada agreed to strengthen the
energy sector in North America. Per the
agreement, the three nations which have
been partners in the North American Free
Trade Agreement (NAFTA) since 1994,
are looking to improve efficiency and foster
research and development in clean
technologies,
PERU. Doe Run’s subsidiary in Peru, Doe
Run Peru, signed an agreement with the
Peruvian government to expand a public
health program for residents near the
company’s metallurgical complex to 18,000
residents of New La Oroya, Santa Rosa de
Sacco, Paccha and Huari. Under the
agreement, the comapny will also
provides for health monitoring for
residents in all age groups.
By YE:06, Doe Run Peru expects to have
invested more than $100mm on
environmental programs.
TRINIDAD & TOBAGO. PetroCanada has reportedy delayed its
exploration for oil and natural gas
offshore Tobago due to a shortage of
drilling rigs. Petro-Canada expects to
commence drilling operations sometime
during the 2Q:07 once it secures a rig.
TRINIDAD & TOBAGO. Alcoa and
Bechtel will jointly participate in the
completion of a number of feasibility
studies associated with a proposed
aluminium smelter project at Cap-deVille. Alcoa announced the studies
necessary for the construction of the
aluminium smelter plant should be
completed by YE:06.
TRINIDAD & TOBAGO. According to
T&T’s Foreign Minister, unitization talks
between the government’s of T&T and
Venezuela aimed at sharing the
hydrocarbon reserves that straddle the
maritime boundary of the two nations
have advanced in recent months.
The nations are currently trying to
finalize the reserve reports on the
Loran/Manatee natural gas field that is
thought to contain 5 Tcf. The current
allocation system would see Venezuela
taking (70-75%) and T&T taking the
remaining (25-30%).
VENEZUELA. The executive president
of Electricidad de Caracas (EDC),
Julian Nebreda, indicated that there are
no expected changes in the electrical
tariffs to take place for the remainder of
2006.
The executive added that any changes in
the tariffs for the electricial sector would
have to first be approved by the
Venezuelan Ministry of Energy and
Petroleum (MEP).
VENEZUELA.
Russia’s
biggest
pipemaker, TMK, announced it might
construct a pipe plant in Venezuela with
the idea of servicing other Latin
American as well as Caribbean markets.
TOP FINANCIAL
ANTIGUA. The Venezuelan government
announced it will provide nearly $28mm in
aid to Antigua to assist the island-nation
renovate its airport and to also assist the
nation’s struggling airline, LIAT.
Venezuela announced $8mm would be
diverted to the airport renovations while the
lion’s share or $20mm would be diverted to
assist LIAT, which is jointly owned by the
governments of Antigua, Barbados, St
Vincent, and Trinidad & Tobago.
As recently as Oct.2005, LIAT received a
$16mm bailout from the islands.
BRITISH
VIRGIN
ISLANDS.
Transmeridian
Exploration
Incorporated
announced
that
Transmeridian Exploration Inc., its
wholly owned British Virgin Islands
subsidiary, extended to 5pm, New York
City time, on Jul.21.2006 its exchange
offer of $290mm aggregate principal
amount of its Senior Secured Notes due
2010 registered under the Securities Act of
1933 for all $290mm aggregate principal
amount of its outstanding Senior Secured
Notes due 2010 sold in Dec.2005 and
May.2006 pursuant to Regulation D under
the Securities Act of 1933.
TEI does not currently intend to extend the
expiration date for the exchange offer
beyond such date.
The exchange offer expired at 5pm, New
York City time, on Jul.18.2006. As of 5pm,
New York City time, on Jul.18.2006,
approximately $279mm aggregate principal
amount of notes (out of $290mm aggregate
principal amount outstanding) had been
tendered in the exchange offer.
Holders of notes who do not tender before
5pm, New York City time, on Jul.21.2006,
will continue to hold unregistered securities
and will have no right to compel the
registration of their notes under the
Securities Act of 1933.
COLOMBIA. Colombia’s state oil
company, Ecopetrol, reported net profits
of COP$826bn Colombian pesos during the
1Q:06. The results were $266bn higher
than budget and a little less than the
$872bn reported during the 1Q:05.
Ecopetrol reported revenues totaled
$4.26bn during the 1Q:06, compared to
$3.41bn during the 1Q:05. The large
increase in year-over-year results was due
to higher income from domestic sales,
10
specifically in diesel fuel, and a 31%
increase in exports, supported by higher
international prices and an increase in the
sale of some products like fuel oil.
“CITGO is positioned for another
excellent year, due to the focus on its
core, strategic business.”
Administrative and marketing expenses fell
9% during the 1Q:06 due to savings and
resource
rationalization
programs.
Ecopetrol also reported it has $8.9bn in
equity to cover pension liabilities.
Now ONLINE
For only US$0.34/day
Some of the highlights from the 1Q:06
include ten (10) exploration wells were
drilled in association with other companies;
four (4) new contracts were signed with the
ANH, highlighting Fuerte Norte and Fuerte
Sur, in joint venture with BHP Billiton,
consolidating Ecopetrol’s presence in the
Caribbean offshore; Ecopetrol´s refineries
(Barrancabermeja and Cartagena) increased
their gross margins and exhibited record
loads of 312,000 b/d; fuel theft continued
on the decline as losses fell to 1,064 b/d
during the 1Q:06 compared to 1,601 b/d
during the1Q:05; and some 13,048 vehicles
were converted over to natural gas. As
such, the total number of cars running to
natural gas now totals 108,982.
DOMINICAN
REPUBLIC.
Vicente
Bengoa Albizu, the DR Finance Minister,
announced the creation of a commission
that would analyze aspects of the sale of
Shell’s 50% interest in the Dominican
Petroleum Refinery (REFIDOMSA).
Albizu explained that the sale of Shell’s
interest in the refinery must be done jointly
with the government; thus, the reason for
creating the commission.
ECUADOR. Chevron Corporation sold
its network of 65 gasoline stations in
Ecuador to Colombia’s Terpel SA for an
undisclosed price. Terpel reportedly
assumed operations of the gasoline stations
on Jul.1.2006 and has a license to use the
Texaco brand for 1-year.
HOUSTON. The board of directors of
CITGO Petroleum Corporation, an
indirect wholly owned subsidiary of
PDVSA, declared a $280mm dividend
payable to its parent, bringing the total
dividend amount for 2006 to $400mm.
“The payment of this dividend reflects the
company’s strong performance and the
continued alignment of CITGO and
PDVSA,” said Alejandro Granado,
Chairman of CITGO’s board of directors.
Production overall declined to 1.10
MMboe/d during the 2Q:06 compared to
1.18 MMboe/d during the the 2Q:05.
In all, Repsol-YPF reported crude oil
production declined 8.1% during the
2Q:06. The company reported that it lost
more than 45,000 boe/d of production from
Venezuela. Further, a leak in a pipeline
resulted in lost production of 11,000 boe/d
from Bolivia.
TRINIDAD & TOBAGO. Moody’s
Investors Service upgraded T&T’s foreign
currency bond rating to Baa1 from Baa2.
Moody’s also announced the local currency
bond rating was affirmed at Baa1.
VENEZUELA. PDVSA is studying the
possiblilty of a debt issuance in Europe,
according to Eudomario Carruyo, Director
of Finances at PDVSA. Carruyo added the
issuance would be part of the company’s
global financial strategy which entails
going to financial markets in Venezuela as
well as abroad.
mbers/signup.php
“We are evaluating several sources of
financing,” according to Carruyo.
Coming In November 2006
Shell administers 137 service stations and
maintains fuel distribution equipment and
facilities in the DR.
of declining production, mainly due to
contract renegotiations in Venezuela.
JAMAICA. Jamaica Broilers Group
announced it will invest J$1.1bn in an
ethanol plant on the island. Funding for
the plant will come from a combination
of debt and equity. The company is
currently in discussions to secure a
$100mm credit line as promised by
Brazil to the Jamaican government. The
plant is expected to be completed by
May.2007.
LATIN AMERICA. Taghmen Energy
Plc, an independent oil and gas
exploration, development and production
company, focused on Latin America and
which listed on AIM in Jan.2005,
announced that all necessary filings and
approvals have been granted relating to
the change in name of the company.
With effect from Jul.24.2006, the
company will change its name to
PetroLatina Energy Plc and will trade
on AIM under that name using the ticker
symbol “PELE”.
SPAIN. In its 2Q:06 financial release,
Repsol-YPF reported its E&P operations
suffered from another consecutive quarter
PDVSA also announced it will launch a
$3.5bn in dollar-denominated bond issue in
the domestic market to fund investment and
improve productivity.
Rafael Ramirez, the President of PDVSA
and Venezuelan Minister of Energy and
Petroleum (MEP), confirmed that the
issuance would be in the domestic market,
adding that the planning has been going on
for weeks now with Venezuelan Central
Bank (BCV by its Spanish abbreviation)
and the Venezuealan Ministry of Finanzas
and PDVSA.
VENEZUELA. Former employees fired by
PDVSA for participating in a 2-month
national strike during 2002-03 reportedly
claim they are still owed $3bn in unpaid
salaries and benefits.
PDVSA fired nearly 18,000 employees for
participating in the national strike against
the government of Venezuela President
Hugo Chavez.
VENEZUELA. On Jul.13.2006, shares of
Venezuela’s Electricidad De Caracas
(EdeC) began to trade on the Latin
American Stock Exchange (Latibex by its
11
Spanish abbreviation). The shares are listed
in euros in Madrid, according to the
Spanish Stock Exchange (BME).
been totally approved, according to a
statements released by the office of
Petro-Production.
EdeC is a Venezuelan electric company
dedicated to the generation, distribution and
commercialization of electricity mainly in
the metropolitan area of Caracas. EdeC is
expected to have an estimated capitalization
of $742mm, after listing its shares on the
Latibex.
The areas are dependent on PetroProduction and ruled by the office of
Civil Service Law and Administrative
Careers, which establishes that no
governmental official can earn more than
the President of the Republic, that is to
say, more than $8,000 per month.
EdeC will be the first Venezuelan company
to have American Depositary Shares (ADS)
quoted on the Latibex.
Blum will administer, control and
coordinate
the
human,
financial,
operational, legal, and other aspects
inherent to the activity of hydrocarbon
exploration of those fields reverted to the
state since May.15.2006.
EdeC was founded in 1895 and is an
affiliate of US-based AES Corporation,
which has an installed capacity of
2,626MW and more than 1 million clients,
and is one of the US’ largest private
electricity companies.
BIDDING
PERU. The Peruvian government is
counting on $1.5bn in annual hydrocarbon
exports to stimulate 5.5% economic growth
in 2006. Peru’s Perupetro is looking to
sign a dozen or more exploration contracts
in order to line up investment for the
nation’s hydrocarbon industry.
DOMINICAN
REPUBLIC.
The
president of the Dominican Petroleum
Refinery (REFIDOMSA), Eduardo
Rodriguez, passed away in a hospital in
Houston, Texas of a stroke. The
Presidential
Technical
Minister,
Temistocles Montes, informed that
Finance Minister Vicente Bengoa Albizu
would provisionally replace Rodriguez
until his successor is appointed.
Now ONLINE
URUGUAY. Uruguay’s Energy Ministry
announced it will invite companies to
tender for a new $400mm base load thermal
power plant with a 400MW capacity as
well as contracts for the construction of
several wind farms and biomass plants. The
bidding will mark the first significant
investments in the nation’s power capacity
in over 15 years.
VENEZUELA. PDVSA announced that a
leak at a pumping station that spilled some
1,000 barrels of oil in the Mara
municipality in Zulia state was the result of
sabotage. The spill was discovered on
Jul.12.2006 and affected an area of around
1,200m.
A spokesperson with PDVSA announced
that the company is currently investigating
the full extent and type of sabotage that
resulted in the leakage.
PDVSA also indicated that it has sent
employees to the affected area to clean up
the oil spill.
TOP QUOTES
Jim Mulva, ConocoPhillips chairman
and CEO on his company’s upstream
and downstream sectors …
Venezuela’s Minister of Energy and
Petroleum, Rafael Ramirez on threats to
cut of petroleum exports to the US …
EXECUTIVE SUITE
ECUADOR. Carlos F. Blum, exsuperintendent of operations for the USbased company, Occidental Petroleum
Corporation, has been named by
Ecuador’s
state
oil
company,
PetroEcuador, as the new Operations
Manager of Block 15 and the Edén-Yuturi
and Limoncocha fields.
Blum will receive a monthly salary of
$12,000 under order from the Ecuadorian
ministerial Commission, although it has not
The pipeline pumps oil extracted from the
Occidental
Petroleum-operated
Cano
Limon field which produces around 60,000
b/d. Other operators in the field include
Colombia’s state oil company Ecopetrol
and Repsol-YPF.
“Looking ahead to the third quarter,
upstream production will be impacted by
seasonal maintenance scheduled in Alaska,
the United Kingdom and Venezuela.
Downstream, we expect lower turnaround
activity, with turnaround costs of
approximately $50mm, before tax”
Uruguay also expects to invest $180mm in
the construction of a tranmission system
that will connect Uruguay with Argentina.
Blum’s designation was made by the Vice
President of Petro-Production, Jaime
Crow.
780 km (480 mile) Cano Limon-Covenas
pipeline stopped pumping oil on
Jul.23.2006 after a series of attacks by
leftist rebels.
mbers/signup.php
ACCIDENTS
COLOMBIA. On Jul.26.2006, Marxist
rebels used explosives to kill two
workers trying to repair the nation’s
second-biggest
pipeline
and
two
Colombian soldiers escorting them. The
“Our policy is clear; if America wants to
have a hostile policy toward us, we will
stop exporting oil to that country … If Iran
were under attack, it would definitely act
just like us”
Rafael Ramirez on oil prices …
“The prices we are seeing today are in
today’s dollars … For us to have the same
amount of revenues that we had in 1970 or
1974, you’d have to put the oil price close
to $100 a barrel, they could reach that
(level) given certain factors”
12
ADVERTISEMENT
MEXICO SERA LA SEDE DEL PRIMER FORO DE INTEGRACION ENERGETICA REGIONAL
México será la sede del primer I Foro de Integración Energética Regional (FIER I) y de la XXXVII Reunión de Ministros de
OLADE, eventos que se realizarán del 6 al 8 de septiembre de 2006.
El cambio de sede de los eventos se dio a causa de que el Gobierno de Bolivia manifestó oficialmente su imposibilidad de realizarlos
en su territorio, debido al proceso de reordenamiento institucional y legal que se está impulsando en ese país.
Ante gestiones de OLADE, realizadas luego de que Bolivia comunicó oficialmente sus excusas, el gobierno mexicano aceptó que el
FIER y la XXXVII Reunión de Ministros de OLADE se realicen en la ciudad de México D.F.
El FIER tiene como objetivo exponer la visión y perspectivas de integración energética de la Región, los proyectos en cartera (gas
natural y electricidad) y los obstáculos para su implementación. Buscará además analizar la forma de cómo mejorar la gestión del
proceso de integración, mediante la definición de una agenda operativa, la creación de marcos jurídicos de integración por
subregiones y la necesidad de establecer un Centro de Conciliación y Solución de Conflictos entre países, instrumentos que se
consideran importantes para impulsar el proceso de integración.
Posterior al FIER, se realizará la XXXVII Reunión de Ministros de OLADE en la cual se someterá la aprobación de cambios
estructurales a la Organización, que contemplan su modernización y el trabajo por subregiones.
13
ENERGY UPDATES
MEXICO
CENTRAL AMERICA
AND
THE CARIBBEAN
14
CARIBBEAN
and that Venezuela through its legislation, cannot negotiate with
private companies.
PetroCaribe Partners End Up Paying Almost 40% Of Crude
Cost
“It is essential that the Central American nation create, organize or
form state companies,” said Chavez. “In Argentina, Kirchner created
a company called ENARSA and we are now providing oil to his
nation.”
PANAMA. Speaking in Panama recently, President Hugo Chávez
admitted that the nations benefiting from PetroCaribe “would end
up paying around 40% of the real cost of what we’re giving.”
“With PetroCaribe we have established flexible payment mechanisms
with years of grace period, with a financing of up to 40%, and
interest of barely 1%. That system carries an implicit ‘donation’ of 25
years to pay,” he specified. “If they end up paying nearly 40% of the
real cost of which we are donating, that does not concern us,”
according to Chavez.
Chavez also spoke about his disposition to construct a refinery and a
natural gas pipeline in Panama, adding that “if we were thinking like
capitalists it wouldn’t be convenient for us to be even talking about a
gas pipeline for Panama, because the United States pays about
$15/MMbtu for natural gas that Venezuela has. However, we would
never sell gas to Panama at $15/MMbtu.”
The agreement “is very positive for Panama; for us it is positive from
our values, from our principles,” affirmed Chávez.
Chavez specified that Venezuela is arranging to sell Argentina and
Brazil natural gas for approximately $5/MMbtu. He affirmed that if
the government of Venezuela were thinking like capitalists “we
would never suggest the Great Gas Pipeline of South America” to the
Brazil’s president, Inacio Lula Da Silva, and Argentine president,
Nestor Kirchner.
Chavez also mentioned the refinery in Montevideo, Uruguay, which
reached an agreement with Venezuela to be expanded.
“If I were thinking in a selfish and capitalist manner, it would be
convenient to me for there not to be a refinery there. Why? Because
we would sell gasoline to Brazil and even more so now that we are
joining Mercosur,” according to Chavez.
Chavez said that the difference between a barrel of crude and a barrel
of gasoline is about $20/bbl. However, Chávez rejected accusations
from the Venezuelan opposition about his giving away oil for free.
“The opposition gave our oil away and contributed to looting the
nation for a long time,” according to Chavez. “Anybody could say:
Chávez is going around scattering Venezuela’s resource, he’s losing
money ... No, we are not losing anything, we are creating a great and
united nation.”
Chávez added that they are evaluating the idea of a trans-Caribbean
gas pipeline, but thinks that “Mr. Danger does not like the idea
because Fidel (Castro is going to have the key in Cuba),” he said
referring to US president, George W. Bush.
Chávez again attacked the “neoliberalism and economic models that
have struck the economies of Latin America and now through oil
prices,” he admitted. However, he clarified that crude prices are not
the only thing that affect “the entire world-wide economic system.”
Panama Must Create A State Oil Company To Join Petrocaribe
Chávez defended the need for Panama to create a state company to
join PetroCaribe, explaining that the Central America’s integration
into that project has been difficult as state oil companies do not exist,
Chavez also commented that the Venezuelan airline, Conviasa, is
buying small airplanes with capacity for 20 or 30 passengers to create
“social routes” to go to the small Caribbean nations to which larger
airlines do not travel.
“Because it is not profitable to the larger airlines and in capitalism
it’s like that,” according to Chavez, “If there are no gains, let it go.”
The president said that Venezuela must send a commission to Puerto
Rico because “they are soliciting us.”
“Someday Puerto Rico will be a Republic. I am sure no one can stop
the winds of history,” insisted Chávez. – LatinPetroleum.com LP
Chevron Announces Successful Delivery of First Natural Gas
from Dolphin Deep Field Offshore Trinidad and Tobago
TRINIDAD & TOBAGO. Chevron Corporation, on behalf of its
affiliate ChevronTexaco Trinidad and Tobago Resources and
partner BG Group, announced the successful delivery of first natural
gas from the Dolphin Deep development to the Atlantic LNG
(ALNG) Train 3 and Train 4 processing facility in Point Fortin,
Trinidad.
Discovered in 1998, the Dolphin Deep Field is located in Block 5a,
about 52 miles off the east coast of Trinidad in the East Coast Marine
Area (ECMA). Production from the Dolphin Deep Field is expected
to average 220 million cubic feet per day (MMcf/d).
The Dolphin Deep development consists of two wells with subsea
completions tied back to the Dolphin platform. Produced natural gas
from the Dolphin platform is transported via a 24-inch, 60-mile
pipeline to the onshore Beachfield gas processing facility. From
there, the natural gas is delivered to ALNG in Point Fortin on the
southwest coast of Trinidad via the 47-mile state-owned onshore
Cross Island Pipeline.
“We are very excited about delivering first natural gas from one of
our key natural gas projects in the Latin America region,” said John
Watson, president of Chevron International Exploration and
Production. “Getting our first gas flowing through new facilities for
Atlantic LNG Train 3 and Train 4 demonstrates our commitment to
this project and to building a beneficial partnership with Trinidad and
Tobago.”
“The successful delivery of first natural gas from the Dolphin Deep
development underscores Chevron’s commitment to growing the
LNG business in Trinidad and Tobago and across Latin America.
Chevron is looking forward to enhancing its participation in the
region’s growing natural gas industry,” added Ali Moshiri, president
of Chevron Latin America Upstream.
Dolphin and Dolphin Deep have contractual arrangements for the
production of at least 475 MMscf/d of natural gas, which include 80
MMscf/d of natural gas to LNG Train 3 and 120 MMcf/d of natural
gas to LNG Train 4. – LatinPetroleum.com LP
15
CENTRAL AMERICA
Nicaragua Government Not Guaranting Import Of Venezuelan
Oil
NICARAGUA. The government of Nicaragua’s president Enrique
Bolaños announced it is not endorsing the agreement signed in
Caracas by the Nicaraguan Municipality Association (Amunic by
its Spanish abbreviation) and Venezuela’s state oil company,
Petroleos de Venezuela (PDVSA).
The chancellor, Norman Caldera, announced that the agreement will
not benefit all Nicaraguans, but only the 87 municipalities controlled
by the mayor of the National Sandinista Liberation Front (FSLN
by its Spanish abbreviation).
The agreement was signed in April 2006 by Amunic and PDVSA and
would cover 10 million barrels of crude oil per year. Nicaragua
would pay for 60% of the oil in cash over a 90-day period. The
remaining 40% would be financed for a period of 25-years, with a
grace period of 2-years and an annual interest rate of only 1%.
Caldera explained that the decision of the Nicaraguan Government is
to continue its diplomatic channel with Venezuela with the intentions
of activating the Caracas pact in hopes of obtaining preferential oil
prices. Further, the government is hoping Venezuela forgives a debt
of $31.3 million.
The financing agreement was signed with Venezuela in 2000 by
Bolaños when he was Vice President. The debt has a 15-year
maturity and carries an annual interest rate of 2% with the possibility
that 25% of the purchases made by Nicaragua are financed under
similar conditions.
Also, the president of the Nicaraguan Central Bank, Mario Arana,
said that the government cannot support an agreement between
private entities since PDVSA and Amunic created the company,
Albanic, wih 60% Venezuelan capital and 40% from Amunic.
The mayor of Managua, Dionisio Marenco, who signed the
agreement with PDVSA, has suggested on several occasions to
Bolaños that the Nicaraguan government should authorize the renting
of storage tanks to the state company, Petronic, so that it could
receive the Venezuelan crude oil. However, Bolaños continues to
deny the move. – LatinPetroleum.com LP
The Guatemalan Government Announces It Has Potential To
Produce Petroleum
GUATEMALA. The president of Guatemala, Oscar Berger, assured
that his nation has an enormous potential to produce petroleum.
Berger also added that there exists a large possibility that Guatemala
will be the location of a Central American refinery and that his nation
is in the process of opening up a number of areas for hydrocarbon
exploration.
“We are very interested in opening areas to exploration because
Guatemala has enormous potential to produce petroleum, and today
with the price of oil around $64 per barrel, it would be a golden
opportunity,” according to Berger.
Berger commented that nations such as Venezuela and Mexico -- that
are large producers of crude oil -- have solved a number of their
problems including lowering the levels of poverty within their
nations adding, “It would be absurd for Guatemala not to try to
explore and export petroleum”.
Currently it is estimated that Guatemala is producing around 17,000
barrels per day.
Berger reiterated that large possibilities that exist that the
Mesoamerican refinery will be constructed in Port Quetzal on the
Pacific coast.
“The refinery will process 250,000 barrels per day of crude oil from
Mexico, but another 100,000 barrels per day are needed and we
would be very happy to produce those barrels here in Guatemala”.
Berger said that the Energy Ministers from the different Central
American nations are preparing the information necessary for the
bidding process related to the final decision on where to construct the
refinery, adding that it will be the investors that ultimately decide on
where the refinery will be constructed.
The other Central American nations in the running for the refinery
include Panama and Honduras.
Infinity Engages Advisor to Explore Options for Nicaragua
Concessions
NICARAGUA. Infinity Energy Resources, Inc. announced that it
has engaged C.K. Cooper & Co., an energy investment banking firm
based in Irvine, California, to explore strategic alternatives with
respect to the company’s 1.4-million-acre prospect in the Caribbean
Sea offshore Nicaragua.
C.K. Cooper will advise the company in exploring various partnering
arrangements and other ownership structures for its interests in the
concessions. Infinity does not intend to disclose developments with
respect to the exploration of strategic alternatives, unless and until its
board of directors makes a decision.
Background
Since 1999, Infinity has pursued this oil and gas exploration
opportunity in Nicaragua. The company believes that the
relationships built during this period with the Instituto Nicaraguense
de Energia (INE) and the geological and geophysical research that
had been completed allowed Infinity to become one of only six
companies qualified to bid on offshore blocks in the first international
bidding round held by INE in January 2003.
In May 2003, Infinity was awarded two concessions (Tyra and
Perlas) and entered into the negotiation process with INE to finalize
the initial exploration and production contracts. In May 2006, the
company announced that it had executed the final exploration and
production contracts.
Highlights of the fiscal terms of the production contract include: 1)
an initial government royalty of 5%, increasing to a maximum of
15%, assuming large-scale production; 2) graduated income tax rates
with a maximum rate of 30%; and 3) an initial working interest of
100% for Infinity.
The contracts provide for an exploration period of up to 6 years and a
production period of up to 30 additional years (with a potential 5-year
extension), assuming successful exploration. The initial capital costs
during the first 12-months are expected to total less than $1 million
(already included in Infinity's previously disclosed 2006 capital
budget), with a total of less than $2 million during the second 12months, to cover costs of environmental studies, geological and
geophysical analysis, acquisition of seismic data, and other
operational expenses.
16
Exploration offshore Nicaragua would focus on Cretaceous carbonate
and Eocene reservoirs. Infinity’s management and consultants believe
that: 1) numerous analogies can be made between the Infinity
concession blocks and multi-billion barrel fields in Mexico and
Venezuela and large fields in Guatemala targeting fractured
Cretaceous carbonates and 2) the presence of Cretaceous source
rocks onshore Honduras and Nicaragua can be projected into the
offshore Caribbean Shelf.
Infinity’s management and consultants believe that there are five
distinct, large structures that underlie its acreage, each of which could
potentially hold substantial oil and gas reservoirs. Prior to the
Nicaraguan revolution of 1978, oil and gas exploration and
production existed and involved large, well-known operators such as
Shell, Texaco, Unocal, Mobil, and Occidental.
Nicaragua
The nation of Nicaragua has continued to evolve, politically and
economically, in recent years and has attracted multi-national firms to
conduct business, such as: Cargill, Chevron, Coca-Cola, El Paso,
ExxonMobil, Kraft Foods (Nabisco), Pepsi-Cola, and Royal Dutch
Shell. In addition, well-known chains and franchisors are now
conducting business in Nicaragua, including: Avis, Best Western,
Budget, Burger King, Century 21, Coldwell Banker, Domino's
Pizza, Hertz, Hilton, Holiday Inn, McDonald's, Napa Auto Parts,
Payless Shoe Source, Pizza Hut, REMAX, Subway, and TGI
Friday’s.
Nicaragua has experienced a series of successful, democratic
elections and smooth transitions of political power, where applicable.
Due to this political stability, and a dedication to building a stronger
economy by representatives from across the political spectrum,
Nicaragua has been able to attract these large, multi-national firms in
recent years as well as an increasing share of the tourism and
retirement living industries.
“We are pleased to announce the engagement of C.K. Cooper to
assist us in pursuing strategic alternatives with respect to our very
exciting and potentially significant prospect in Nicaragua,” said
Stanton E. Ross, Infinity’s chairman and lead officer for the strategic
alternatives process. “The record high crude oil prices and our belief
that the market price for Infinity's common stock reflects little to no
value for our Nicaraguan prospect, have made the timing optimal, in
our view, to explore strategic alternatives for the prospect.” –
LatinPetroleum.com LP
MEXICO
Energy Minister from 12 Latin American Regions Confirm Their
Attendance at the FIER
MEXICO CITY. The Ministers of Energy of Barbados, Bolivia,
Brazil, Colombia, Chile, Ecuador, El Salvador, Honduras, Mexico,
Nicaragua, Panama, and Paraguay confirmed their participation at the
I Regional Energy Integration Forum (FIER) and the XXXVII
Meeting of Ministers of the member nations of the Latin American
Energy Organization (OLADE), which events are to be held on
September 6-8, 2006, in Mexico City.
Through official notices sent to the headquarters of the Executive
Secretariat, each of the 12 ministers ratified their participation and
stated their support for the work being done by OLADE.
Likewise, companies with a regional presence, such as Ecopetrol,
British Petroleum, ISA, Iberdrola, ENAP, Red Eléctrica,
Transredes, and others, also confirmed their presence.
Representatives of regional and international agencies such as
ECLAC, ARPEL, ALADI, CIER, CEAC, and others have also
confirmed their attendance, as well as several international experts
and social agents who are interested in integration issues.
Within the framework of this presence of ministries, businesses and
institutions, the Forum is expected to discuss drafts and resolutions
aimed to support the sub–regional integration process, as well as a
proposal for a Center for Conflict Conciliation and Solution among
the countries, specializing in energy.
After the Forum, the attending ministers will hold OLADE’s
XXXVII Meeting of Ministers, which will take actions aimed to
modernize the organization and restructure it to work by sub–regions.
– LatinPetroleum.com LP
PEMEX Reports Production Of 1,340 Million Cubic Feet Per
Day Of Natural Gas In The Burgos Basin
MEXICO CITY. Petroleos Mexicanos (PEMEX) reported this past
May 31, 2006, record production of 1,340 million cubic feet per day
(MMcf/d) of natural gas in the Cuenca de Burgos (Burgos Basin), an
amount that represents 25% of the total natural gas production of the
nation.
At a national level, PEMEX obtained the highest natural gas
production on record, with an average of 5,284 MMcf/d. The increase
was due to increased levels of investment and the implementation of
newly-applied technology in the Burgos Basin as well as in fields
located in the offshore regions of Sonda de Campeche.
Production in the Burgos Basin started in 1945 and its development
and operation allowed it to reach a production level of 670 MMcf/d
in the 1970s, after which a natural decline of this geologic zone was
registered.
In the mid-1990s, the daily gas production in Burgos Basin was
around 180 MMcf/d. As such, the present production represents a
growth of almost 700% in the last decade.
From 1994, PEMEX developed a rejuvenation process in the basin,
as a result of a feasibility study, in which the great gas-producing
potential in the zone was determined. – LatinPetroleum.com LP
PEMEX Detects 91 Illicit Thefts Along Pipeline Network
MEXICO CITY. To date in 2006, PEMEX security officials have
detected 91 covert thefts at diverse facilities throughout the nation, as
part of defensive actions in the monitoring of the national network of
pipelines to combat the illicit fuel market.
Just in the last three months PEMEX personnel has recovered
440,000 liters of hydrocarbons that was being removed illegally.
PEMEX has presented penal charges that allowed for the
apprehension of nine (9) people, as presumed perpetrators
responsible for the fuel thefts.
Of the total amounts of thefts discovered during the course of the
year, 88 were located at PEMEX-Refining installations, one (1) at a
PEMEX-Exploration and Production (PEP) pipeline and two (2)
at a PEMEX Gas and Basic Petrochemical gas line.
17
Last month the highest number of detections was reported with the
discovery of six (6) secret covert thefts. The first was located at the
201 kilometer mark of the Minatitlán-Salina Cruz pipeline. The
number of covert thefts discovered at this pipeline reached nine (9)
during 2006.
In another case, there were two thefts almost together located, at the
421 kilometer mark of the Gómez Palacio-Ávalos, pipeline (8 and 10
inches lines).
There was a similar situation at the 663 kilometer mark of the
Cosoleacaque-Venta de Carpio gas pipeline (30 inch line) where two
(2) illegal pipelines were found, and only a few meters apart form
each other.
Also, personnel from the Gerencia de Servicios de Seguridad
Física (Physical Security Management Services), of the Reynosa
District, in coordination with personnel from the Terminal de
Almacenamiento y Distribución - TAD (Storage and Distribution
Terminal) in Nuevo Laredo, Tamaulipas, surprised truck drivers
Héctor Javier Castillo Ornelas and Jesús Hiram Navarro Carrillo as
they tried to unload fuels at a plant in Nuevo Laredo.
Both subjects had left the TAD of Reynosa with a shipment of diesel,
on the way to the TAD in Nuevo Laredo; however, their trucks were
transporting a hydrocarbon made exclusively by PEP that is not on
sale to the public. Castillo Ornelas and Navarro Carrillo were placed
in the custody of the Public Ministry, as presumed perpetrators of the
theft of 132,000 liters of diesel fuel and other fuels transported in the
pipelines of private companies “Javier Cantú Barragán” and “Garza
Ruiz.”
In another incident, security personnel of Veracruz detected an illegal
theft at the 282 kilomeer mark of the New Teapa-Poza RicaCadereyta pipeline route, where there were also found two tankers
with a capacity of 30,000 liters each, loaded with crude.
As a result of a patrol conducted along the Satélite Gómez Palacio
pipeline, a covert land operation was discovered pertaining to the San
Rafael public lands, in the municipality of Parras de la Fuente,
Coahuila. The individuals, Gilberto Vega Rodríguez and Abelardo
Vega, were detained aboard a 3.5-ton capacity truck, with a modified
tank containing stolen gasoline.
Another irregular situation was reported by telephone to the XVI
Military Zone that immediately informed PEMEX personnel, that an
abandoned pipeline with 43,000 liters of hydrocarbon in its tank was
fitted unto a 16-inch diameter flank of Salamanca-Guadalajara
pipeline. Later, a hidden outlet pipeline was located at the 63
kilometer mark of the same pipeline, where it is presumed that the
fuel had been extracted. – LatinPetroleum.com LP
PEMEX Strengthens Its Efforts To Improve Fuel Quality
MEXICO CITY. PEMEX has orchestrated a series of efforts to
improve the quality of its fuels; increase its refining capacity, which
at the moment, is 1.3 million barrels per day; and to produce gas and
diesel of a better quality and higher value on the market, according to
the General Manager of PEMEX-Refining, Miguel Tame
Domínguez.
Domínguez announced that credits to gas station owners would be
increased from 5.6 to 8 days, a measure that would be applied to the
businesspersons who adhere to the new modernization program of the
gas stations, whose intention is to guarantee total consumer
satisfaction and who will help fight the illicit fuel market.
On the matter, Carlos Pani Espinosa, PEMEX Refining’s
Commercial Assistant Director, indicated that the extension in terms
of credit, demonstrates PEMEX’s commitment to support this
business sector, which will stimulate the signing of the new franchise
contract, which offers new facilities to PEMEX to verify the
provision of gasoline and to achieve better control in real time of the
outbound and inbound fuels.
Espinosa reiterated that the incorporation of the quality symbol
“Cualli” is so that the consumers can identify that the franchises with
the new contract depend on greater elements of control and
supervision.
In light of the members of this organism nationwide, which groups
80% of the gasoline retailers -- headed by its outgoing president, José
Angel García Hernandez -- Tame Domínguez emphasized that
PEMEX will integrate a permanent committee to analyze measures
which allow trade relations to improve, according to the law.
Domínguez also mentioned that currently gasoline consumption in
Mexico was around 700,000 barrels per day on average, in
comparison to 490,000 barrels per day in 2000.
He also emphasized that the increasing demand for gasoline, made
the reconfiguration of the Minatitlán refinery with an investment of
$2,400 million necessary, and that would allow the production of an
additional volume of gasolines of 70,000 barrels per day in 2008.
Domínguez added that the reconfiguration of the Salina Cruz,
Salamanca and Tula refineries is need to satisfy the national market
and to reduce gasoline imports, which currently represent 28% of
domestic consumption. – LatinPetroleum.com LP
PEMEX Signs Agreement To Support Battle Against Fuel Thefts
MEXICO CITY. PEMEX and the Secretariat of Federal Public
Security, through PEMEX-Refining and Mexico’s Preventive
Federal Police (PFP), signed a collaborative agreement called
“Operation PEMEX 2006.” The agreement is oriented at dissuading,
preventing and combating the robbery of fuel from PEMEX’s
pipeline network. The agreement will also address ways to dismantle
criminal organizations dedicated to the illicit theft of fuels throughout
Mexico.
The agreement was signed by the General Manager of PEMEX
Refining, Miguel Tame Domínguez, and the commissioner of
Preventive Federal Police, Brigadier-General Eduardo Alexander
Martínez Aduna in the presence of the General Manager of PEMEX,
Luis Ramírez Corzo, and Public Security Secretary, Eduardo Medina
Mora.
During the signing ceramony, Ramírez Corzo asserted that PEMEX
will not stop in its fight against the illicit fuel thefts, adding that a
number of diverse programs have been started up with the
coordination of federal, state and municipal governments.
Ramírez Corzo asserted that increased vigilance of PEMEX’s
pipeline network has resulted in the detection of 134 clandestine
thefts in the last year, in addition to orchestrating diverse measures to
diminish the theft of products from refineries and storage terminals,
as well as the siphoning of gasoline from storage tanks.
On the other hand, the agreement with PEMEX gives continuity to
the work done over the past two years, which has contributed to the
reduction of fuel thefts, which directly benefits the public finances of
the nation, according to Medina Mora.
18
Medina Mora assured that all inspections that will take place with
PEMEX will fortify the PFP’s mission to dismantle the criminal
organizations dedicated to this activity. He also stressed the
responsibility of the PFP to safeguard the physical and patrimonial
integrity of the society, to assist in the prevention of high-impact
crimes and to preserve order and public peace.
Tame Domínguez indicated that the actions have been put in place to
fight the illicit fuel market such as the application of the so called
device “Diablo Espesor Cero”, which analyzes the surface on the
inside of the pipes to detect clandestine connections, as well as the
operation of mobile labs that allow the verification of the quality of
the products that are sold in the service stations, with the purpose of
avoiding their adulteration.
The head of PEMEX-Refining announced that shortly 55 new labs
will begin to work to add to the 24 that began operation last year. He
also mentioned that PEMEX authorized a budget of Ps132 million
Mexican pesos to install a tracking system on 1,255 storage tanks
which allow for the tracking of deviations in the routes.
With the signing of the agreement, the PFP, through its operational
areas, will carry out constant patrols via air and land to guard the
nearly 14,000 kilometers of pipelines that make up the PEMEXRefining pipeline network. The PFP announced it will also increase
the inspection, security and monitoring of over 48,000 kilometers of
federal highways and different points where these types of illegal fuel
thefts take place, including at times randomly checking public
transport.
The PFP also announced that intelligence activity will be coordinated
to allow the organization to investigate the dismantling of organized
gangs that conduct the clandestine thefts as well as the detention of
delinquents caught stealing fuels and/or gasoline from the pipeline
network
The PFP, in coordination with elements of PEMEX’s security, will
also carry out special procedures in specific high-risk zones for
robbery, adulteration, sale and storage of PEMEX fuels including
Magna and Premium gas, diesel, asphalt and fuel oil.
Since the implementaion of increase security around the pipeline
network in March 2004, PEMEX has recovered more than Ps14
billion Mexican pesos. – LatinPetroleum.com LP
PEMEX: Petrochemical Production Up 7.4% In June 2006
MEXICO CITY. PEMEX announced petrochemical production in
June 2006 was 969,000 tons, up 7.4% compared to May 2006 and the
highest level registered to date in 2006.
The total volume of petrochemical production rose to 5,411,000 tons
during the first half of 2006, representing an increase of 52,000 tons
compared to the first half of 2005.
The majority of the petrochemical production corresponded to
ethylene which reached 103,000 tons in June 2006, up 16% compared
to 89,000 tons in May 2006.
The production of ethylene increased by 26% during the first half of
2006 compared to the 82,000 tons registered in January 2006.
The production of benzene reached 15,000 tons while the production
of low-density polyethylene and the toluene reached 31,000 and
21,000 tons, respectively.
Ammonia registered the largest increase in production, rising 26%
during the first half of 2006 to 340,000 tons compared to 269,000
tons during the first half of 2005. – LatinPetroleum.com LP
Sales Of Petroleum Products In Mexico Reach Almost Ps137
Billion Pesos
MEXICO CITY. During the first four months of 2006, PEMEX sold
an average volume of 1,767,000 barrels per day of petroleum
products in the national territory. The sales have an accumulated cash
flow value of almost Ps137 billion Mexican pesos, up 26% compared
to the figure billed in the same four-month period in 2005.
Income from domestic sales of petroleum products from January
2006 to April 2006 surpassed the amount obtained for the same year
ago period by about Ps28 billion pesos.
The average marketing and sales volume during the four-month
period totaled 696,500 barrels per day of gasoline for cars, of which
83% corresponded to Magna and the rest to Premium. The sales of
the Magna brand during the four-month period in 2006 totaled
Ps68,706 million pesos, up 32% compard to the same four-month
period in 2005.
It is worth mentioning that the income obtained for the sale of
automotive gasoline during the four-month period, represented more
than 50% of the total value of the petroleum product sales in Mexico.
As regards to diesel, the average sales volumes totaled 289,000
barrels per day of de-sulphurized diesel while the sales of marine
diesel averaged 44,000 barrels per day. Total sales of diesel
amounted to Ps27,805 million pesos, up compaed to the same period
sales in 2005.
The domestic sales of turbosina (airplane fuel) averaged 62,000
barrels per day, representing sales revenues of Ps6 billion pesos, an
amount that represented an increase of 20% compared to 2005.
Likewise, PEMEX’s average sales volumes of liquefied gas totaled
312,000 b/d, repreenting sales revenues of Ps17,410 million pesos, an
amount that represented an increase of 10% compared to 2005.
With respect to fuels, PEMEX sold an average of 296,000 barrels per
day to the national industry, representing sales revenues of Ps14,653
million pesos, an amount that represented an increase of 39%
compared to 2005.
Sales of other products such as natural gas, domestic gasoil, industrial
fuel, asphalts, paraffin, coke, solvents, grease and lubricant, among
others, averaged 68,000 barrels per day during the first four months
of 2006, representing an increase of 40% compared to the first four
months of 2005, and generating sales revenues of Ps2,478 million
pesos. – LatinPetroleum.com LP
Baker Energy Wins Logistics Asset Management Contract
MEXICO CITY. Baker Energy, a unit of Michael Baker Corp.,
announced that it has received a multi- phase contract, estimated at
$1.2 million, from Grupo Delta for customization and
implementation of a logistics asset management system for its
customer Petroleos Mexicanos (PEMEX). Phase One of the project
is currently underway with completion of the four-phase project
slated for late 2007. Using Bakeritrac(SM), Baker’s web-based
logistics asset management software application, the fully
implemented system will provide
19
PEMEX with logistics management capabilities from their Dos
Bocas, Cuidad Del Carmen, Tampico, and Tuxpan ports on the
Yucatan Peninsula, Mexico.
Banamex estimates that each barrel of crude oil exported in 2006,
Mexico will report extra revenues of $18.50/bbl based on the
$36.50/bbl price used in the federal budget.
Baker will provide system development, system implementation,
process development, personnel training, logistics counseling, and
maintenance and operations consulting.
For the period January to May 2006, Mexico reported average crude
oil exports of 1.934 million barrels per day (MMb/d).
“We are pleased to be working with Grupo Delta on this important
project for PEMEX. With such an expansive geographic region, the
sheer diversity and number of logistical assets, and the level of
technology required to provide a valuable solution, we look forward
to bringing all of our capabilities together to meet these challenges,”
according to Walter Jackson, vice president of Baker Energy’s global
training services.
John N. Hickman, senior vice president and operations manager of
Baker Energy, added, “This project highlights Baker’s ability to
leverage broad resources to provide innovative solutions in nontraditional markets, and it represents progress in our efforts to expand
our presence in this region and with this important client. The
culmination of technologies we are employing for this project will
transform logistics asset management for PEMEX.” –
Analyst at Bursamétrica and Globus Consultores, Ignacio Ricardo
Brave Cedillo and Miguel García Reyes respectively, agreed that the
current high price of crude oil relates to doubts about supply and
demand as well as seasonal concerns.
Both analyst also commented that crude prices are also influenced by
certain geopolitical events worldwide while both also agreed that the
largest increases in demand are currently coming from the US and
China.
Recent reports from the US-based Energy Information
Administration (EIA) affirmed that the largest demand in the
consumption of crude oil is coming from North America. The reports
also showed that demand for crude oil worldwide is around 85
MMb/d. – LatinPetroleum.com LP
PEMEX assumes LPG fleet cost with the closing of San Juan
duct
PEMEX says restoration work reaches 85% completion mark at
La Venta No. 215 well
MEXICO CITY. PEMEX announced cleaning and restoration work
at the La Venta No. 215 well is 85% done.
On July 6, 2006, PEMEX reported a crude oil spill in a section of the
8-inch diameter pipeline that connects to the La Venta No. 215 well
located in the Ejido “Freedom”, located in the municipality of
Huimanguillo in Tabasco, Mexico.
The crude oil that spilled from the pipeline covered an area of 630
square meters.
Officials with Mexico’s Department of Industrial, Security and
Environmental Protection (SIPAC by its Spanish abbreviation) and
PEMEX-Exploration and Production (PEP) announced the spill
was being contained and that operations are still ongoing as regards
to the complete recover of the oil spilled in the area.
The zone where the spill occurred is along a heavily traveled
highway, la Villa La Venta to Villa Benito Juárez in Tabasco State. –
Banamex: Mexican oil price to average $55 per barrel in 2006
MEXICO CITY. Due to strong demand worldwide for petroleum, a
number of Mexican consulting firms expect the crude oil prices
Mexico receives for its oil exports will average between $51 and $56
per barrel (bbl) in 2006, much higher than the average prices in 2005.
As such, the price that Mexico receives for its crude oil exports could
be between $14.50/bbl and $19.50/bbl higher compared to the
$36.50/bbl price used to calculate the budget for 2006.
The average price estimates from four (4) Mexican consulting firms
for Mexico’s crude oil in 2006 include Mexican-American
Chamber ($51.03bbl); Bursamétrica ($56/bbl); Banamex ($55/bbl)
and Globus Consultores ($55/bbl).
MEXICO CITY. Prior to the scheduled closing last month of the San
Juan Ixhuatepec duct, Mexico’s Energy Secretary (Sener)
announced that PEMEX would assume the necessary fleet cost to
transport liquefied gas petroleum (LPG) to the plants of the private
companies operating in the región.
Based on industry data, the monthly expenses that PEMEX will
assume to cover the fleet cost when the duct is closed on Jul.11.2006
will be near Ps7 million Mexican pesos ($622,222)
Héctor Moreira Rodriguez, the Under-Secretary to the Energy
Secretary, informed that the duct supplies domestic gas to 25% of the
population located in the Mexico valley (Valle de Mexico).
The gas companies expect to receive the LPG daily by means of
about 56 tankers. PEMEX will cover the fleet cost for the
transportation of the LPG in order to guarantee price stability for the
consuming public.
According to local officials, “The price of LPG has been increasing
around 0.33% each month and could end the year at about 4%.”
In order for the private companies to receive the LPG shipments, they
are required to make small investments as relates to the maintenance
of the fleet so that the vehicles are in working conditions to transport
the fuels.
Mexican officials assured that there will be no impact on prices as
they are guaranteed not to increase due to a national decree.
“The final price that the public pays has been maintained each month
at 0.33%,” according to Moreira Rodriguez. – LatinPetroleum.com
LP
Decree That Reforms The Regulations Of Law That Regulates
Constitutional Article 27 On Matters Of Petroleum, As Well As
The Mining Law
MEXICO CITY. As a consequence of the explosion that occurred on
February 19, 2006, at the “Pasta de Conchos” cool mine due to the
20
accumulation of firedamp (**) gas, on March 7, 2006 the Energy
Commission of the Chamber of Representatives of the Mexican
Congress of the Union expedited the approval of the initiative filed
before said sovereignty on December 6, 2005, which contains the
Decree that Reforms Diverse Provisions of the Mining Law, as well
as the Law that Regulates Constitutional Article 27 on Matters of
Petroleum.
On June 26, 2006, the Decree that Reforms the Regulations of Law
that Regulates Constitutional Article 27 on Matters of Petroleum, as
well as the Mining Law, appeared in Mexico’s Federal Gazette.
According to the initiative:
“…the extraction of mineral carbon from its deposits is subject to the
presence of firedamp gas however, even from an economical stand
point - this energy is potentially profitable - it is not being recovered
nor exploited”
In this manner, the objective of the document is highlight that based
on the legal frame in force both the environmental and concession
title coal mine holders may obtain benefits by:
-- Preventing the irrational, uncontrolled venting of firedamp gas to
the atmosphere,
-- Preventing squandering of a non-renewable natural resource by
recovering and using it,
-- Preventing that due to concentrations of gas in mineral carbon
mines insecure conditions are generated,
-- Encouraging the recovery of gas.
The reform also presents a modification to section II of article 3 of
the Law that Regulates Constitutional Article 27 on Matters of
Petroleum.
It confers the regulation of the recovery and use of gas associated to
mineral carbon deposits to the Mining Law; hence, excluding what
was previously foreseen in the sense that the Nation was the only
competent entity to perform activities related to the petroleum
industry, while adding a paragraph that excludes gas associated
mineral carbon deposits from the petroleum industry, and reserving
the regulation of its recovery and use to the mining law.
In addition, the modification to six (6) articles of the Mining Law has
been approved, these are:
Modification to Article 4 sets forth the addition of a sentence: “and
gas associated to its deposits”.
in return would pay the price set in a gas transportation and delivery
contract.
The requirement to notify the Ministry of Economy respecting the
commencement and suspension of activities related to the recovery
and use, as well as of the discovery of gas not associated to mineral
carbon deposits is contained in sections XI, XII, XIII, and XIV of
Article 27.
Finally, Article 55 is also modified to this current context by
establishing new cases for the cancellation of mining concessions;
these are: recover, store, transport, or provide associated gas
transportation and delivery services without the corresponding
permit, to transfer gas associated to mineral carbon deposits, and the
omission to inform in regards to the finding of gas not associated to
mineral carbon deposits discovered during exploration or exploitation
phases of the deposits of said mineral.
-- The reform intends, with the modification of the legal frame in
force, to grant concessionaries an incentive to perform activities
tending to the recovery, use, and self-consumption of firedamp gas
contained in carbon deposits, while guaranteeing safety conditions
for mine workers.
-- It seeks to use nonrenewable energetic sources encouraging their
use in the generation of electricity, or by the delivery to PEMEX, in
order to ascertain a rational and regulated use.
-- Under the Clean Development Mechanism or CDM (created under
the Kyoto Protocol), projects for the use and capture of fugitive
emissions can be implemented to be presented before the Executive
Board of the CDM to thereafter obtain benefits from the Reduced
Emissions Certificates.
The Environment and Sustainable Development practice area at
Gonzalez Calvillo, S.C. has broad experience in the obtainment of
authorizations and permits applicable to this type of project; as well
as in what refers to CDM’s that could be associated to them,
including the obtainment of approval letters from the Ministry of the
Environment and Natural Resources as designated authority.
This document is not intended to solve any related issue; it is only a
personal consideration from its author regarding the aforementioned
modifications.
Note: ** Firedamp gas is a compound mostly made up of methane
(CH4) a green house gas with a caloric potential 21 times higher than
Carbon dioxide (CO2). When it is mixed with air, it creates explosive
mixes, and in specific conditions generates rarefying of air due to the
lack of oxygen.
For further information, please contact:
The same thing occurs in Article 5, where it has been established that
from the Mining Law’s governance is not excluded in reference to
the regulations of gas associated to mineral carbon deposits.
Additionally, contents of Article 7 have been modified in sections
XIII and XIV, and the addition of sections XV, XVI, and XVI is set
forth. This compilation provides shared faculties for the Ministries of
Energy and Economy in matters of recovery and exploitation of gas
associated to mineral carbon deposits.
It stands out for the purposes of this document that section XIII was
added to Article 19, granting the right to obtain a permit from the
Ministry of Energy for the recovery and exploitation of gas
associated to mineral carbon deposits, materializing the latter (the
exploitation) by means of self supply or by supplying PEMEX, who
GONZÁLEZ CALVILLO S.C.
Montes Urales 632
Piso 3
Lomas de Chapultepec
Delg. Miguel Hidalgo
11000, México D.F.
Contact: Leopoldo Burguete Stanek
Partner, Área Ambiental
Email: lburguete@gcsc.com.mx
Tel. +55.52.02.7622
Fax +55.55.20.7671
21
MEXICO NATURAL GAS PRODUCTION TRACKER
Mexico: Natural Gas Production (MMcf/d)
Year
Assoc.
BY TYPE
Non-Assoc.
Total
Offshore
BY REGION
S. Onshore
N. Onshore
Total
2001
3,239
1,272
4,511
1,530
1,743
1,230
4,511
2002
3,118
1,305
4,423
1,452
1,704
1,268
4,423
2003
3,119
1,379
4,498
1,522
1,630
1,347
4,498
2004
3,010
1,563
4,573
1,550
1,495
1,528
4,573
2005
2,954
1,864
4,818
1,582
1,400
1,835
4,818
2006E
3,048
2,140
5,188
1,725
1,339
2,124
5,188
Jan.
Feb.
Mar.
Avg. 1Q:05
2,928
2,893
2,877
2,899
1,682
1,750
1,790
1,741
4,610
4,644
4,667
4,640
1,537
1,521
1,497
1,518
1,427
1,412
1,417
1,419
1,646
1,710
1,753
1,703
4,610
4,644
4,667
4,640
Apr.
May.
Jun.
Avg. 2Q:05
3,000
2,971
3,027
2,999
1,829
1,873
1,883
1,862
4,829
4,844
4,910
4,861
1,611
1,622
1,625
1,619
1,426
1,373
1,426
1,408
1,792
1,849
1,860
1,834
4,829
4,844
4,910
4,861
Jul.
Aug.
Sep.
Avg. 3Q:05
2,823
3,020
2,993
2,945
1,875
1,907
1,903
1,895
4,697
4,927
4,895
4,840
1,438
1,643
1,631
1,571
1,408
1,397
1,389
1,398
1,851
1,887
1,876
1,871
4,697
4,927
4,895
4,840
Oct.
Nov.
Dec.
Avg. 4Q:05
2,936
2,971
3,009
2,972
1,928
1,952
1,988
1,956
4,864
4,923
4,998
4,928
1,581
1,618
1,664
1,621
1,381
1,380
1,370
1,377
1,902
1,924
1,964
1,930
4,864
4,923
4,998
4,928
Jan.
Feb.
Mar.
Avg. 1Q:06
3,025
3,012
3,036
3,024
2,037
2,045
2,124
2,069
5,062
5,056
5,160
5,093
1,679
1,668
1,694
1,680
1,361
1,359
1,363
1,361
2,022
2,029
2,104
2,052
5,062
5,056
5,160
5,093
Apr.
May.
Jun.
Avg. 2Q:06
3,082
3,080
3,052
3,071
2,203
2,204
2,223
2,210
5,284
5,285
5,275
5,281
1,745
1,787
1,771
1,768
1,353
1,309
1,291
1,318
2,186
2,189
2,212
2,196
5,284
5,258
5,275
5,281
Jul.
Aug.
Sep.
Avg. 3Q:06
Oct.
Nov.
Dec.
Avg. 4Q:06
Source: PEMEX
22
MEXICO CRUDE OIL PRODUCTION TRACKER
Mexico: Crude Oil Production (Mb/d)
Year
Heavy
BY TYPE
Light
Super-light
Offshore
BY REGION
S. Onshore
N. Onshore
LPG *
Total
2001
1,997
659
471
2,540
509
79
433
3,560
2002
2,174
847
157
2,604
498
75
408
3,585
2003
2,425
811
135
2,814
483
74
418
3,789
2004
2,458
790
135
2,829
473
81
442
3,825
2005
2,387
802
144
2,753
497
84
426
3,760
2006E
2,353
815
169
2,752
500
84
437
3,774
Jan.
Feb.
Mar.
Avg. 1Q:05
2,446
2,442
2,345
2,411
784
787
780
784
121
120
126
122
2,793
2,786
2,693
2,757
477
482
477
479
82
81
81
81
439
435
416
430
3,790
3,784
3,668
3,747
Apr.
May.
Jun.
Avg. 2Q:05
2,489
2,501
2,454
2,481
791
808
824
808
129
132
147
136
2,843
2,859
2,829
2,844
483
493
510
495
83
88
87
86
446
441
448
445
3,855
3,882
3,873
3,870
Jul.
Aug.
Sep.
Avg. 3Q:05
2,167
2,444
2,395
2,335
769
812
818
800
145
157
154
152
2,488
2,824
2,774
2,695
508
505
510
508
85
84
83
84
399
428
416
414
3,481
3,842
3,783
3,702
Oct.
Nov.
Dec.
Avg. 4Q:05
2,244
2,330
2,397
2,324
818
813
821
817
159
167
170
165
2,637
2,724
2,798
2,720
502
504
506
504
82
83
84
83
407
412
431
417
3,628
3,723
3,818
3,723
Jan.
Feb.
Mar.
Avg. 1Q:06
2,410
2,346
2,369
2,375
793
798
810
800
169
167
171
169
2,789
2,729
2,765
2,761
500
498
500
499
83
84
84
84
438
436
432
435
3,810
3,747
3,781
3,779
Apr.
May.
Jun.
Avg. 2Q:06
2,375
2,338
2,276
2,330
823
822
844
830
172
169
168
170
2,780
2,742
2,705
2,742
504
502
498
501
86
84
84
85
441
441
436
439
3,811
3,770
3,723
3,768
Jul.
Aug.
Sep.
Avg. 3Q:06
Oct.
Nov.
Dec.
Avg. 4Q:06
Source: PEMEX. Note: * = Includes condensates.
23
ADVERTISEMENT
MEXICO WILL HOST THE FIRST REGIONAL INTEGRATION ENERGY FORUM
Because of the impossibility of Bolivia to host the First Regional Integration Energy Forum (FIER) and the XXXVII
Ministers Meeting of OLADE, the Government of Mexico has accepted to host these two important events that will be
held in Mexico D.F., on the same dates, September 6-8, 2006.
The purpose of this Forum is to expose the vision and perspective of the region’s energy integration process and display
several natural gas and electricity projects and obstacles for its implementation.
The Forum will strive to establish a working agenda to develop and improve a legal framework for energy integration by
sub regions. Also, it will establish the necessity to create a Center for Friendly Conciliation and Conflict Solution among
countries.
During the event, energy integration dispersed and isolated efforts will be discussed in order to frame them into a regional
integration future agenda that will generate the necessary confidence for the development of natural gas and electricity
projects.
Following the Forum, OLADE’s XXXVII Ministers Meeting will be held, where structural changes to modernize and
restructure to further promote energy integration by sub regions, will be discussed and approved.
24
Energy Panorama
Upstream
Downstream,
Midstream, Et al
25
Note: All figures are in US dollars unless stated
differently.
CHILE
According to data from the Costa Rican
Central Bank the value of the petroleum
imports increased by $356mm during this
timeframe.
ENAP, along with British Gas and Chilean
group Copec will jointly contruct a
400MW capacity electricity generating
plant valued at $300mm.
For the past year or so, the Central
American government has implemented a
series of measures to restrict the usage of
automobiles in a move to push for
reducing the consumption of fuel.
The companies expect to have the
feasibility study for the project ready by
Nov.30.2006. The plant is expected to be
operational some 24-30 months later or
sometime aroud mid-2009.
By means of a formula that is adjusted
automaticly, the prices of fuels for
consumers in the nation are constantly
changing.
COLOMBIA
Now ONLINE
Emerald Energy Plc announced it
completed drilling of the Centauro Sur No.
2 appraisal well in its Campo Rico block in
Colombia.
The well has been drilled to a total depth of
10,865ft, completed for testing with an
electrical submersible pump and in the first
24 hours of steady test production produced
in excess of 700 barrels of oil.
Montas, revealed that the DR government
has accumulated a RD$3bn peso deficit in
tax revenue from gasoline and other fuel
taxes. Montas attributed the decrease in tax
revenue to the conversion of many vehicles
to the use of LPG rather than gasoline.
Montas announced that each gallon of
gasoline provided RD$36 in taxes for the
government, but LPG does not pay any tax.
Montas added that the conversion to LPG
is the main factor behind the decrease in
fuel tax revenue.
MEXICO
Mexico’s state oil monopoly, Petroleos
Mexicanos (PEMEX), one of the largest
suppliers of crude oil to the US market,
announced total production in Jun.2006 fell
to average 3.768 MMb/d compared to
3.770 MMb/d in May.2006.
“We are pleased to have confirmed the
production potential of the Centauro Sur
field, discovered earlier in the year,”
according to Alastair Beardsall, Emerald’s
Chairman,
Mexican construction and engineering
company ICA SA announced it signed four
(4) civil construction contracts worth
$60mm. The contracts involve industrial
construction work for PEMEX two
contracts to construct installations for naval
stations in Isla Mujeres and Cozumel for
the Ministry of the Navy and a contract to
build a museum and related work at the
National University of Mexico (UNAM).
According to Armando Zamora, the
director
of
Colombia’s
National
Hydrocarbons Agency (ANH), Colombia
expects to discover 4 billion barrels of
crude oil by 2020 in a move to assure that
nation’s self-sufficiency in petroleum.
Mexico has increased its ability to protect
its hydrocarbon installations offshore the
Sonde de Campeche area of the Gulf of
Mexico, with the use of a powerful new air
defence
radar
network
from
ThalesRaytheonSystems.
Colombia expects to sign at least 30 E&P
contracts in 2006 with the idea of drilling
around 60 wells per year.
Colombia’s 1.5 billion barrels of known
recoverable oil reserves are depleting
rapidly and absent major discoveries, the
nation could become a net oil importer by
the year 2011.
Oil production in Colombia has fallen from
a peak of 815 Mb/d in 1999 to around 538
Mb/d.
COSTA RICA
Costa Rica reported that the amount of
petroleum that it purchases was up 43%
between Jul.2005 and Jun.2006 to
$1,170mm.
mbers/signup.php
DOMINICAN REP.
Taylor Biomass Energy announced it is
interested in entering the DR energy
market. Taylor Biomass has identified 10
areas throughout the island where
garbage-fueled
plants
could
be
potentially installed with an estimated
$300mm annual savings in fuel imports
for the small island-nation.
Taylor Biomass proposes the plan could
generate 20% of the present installed
capacity, adding each plant would have
the capacity to supply 100,000
households.
The
Presidential
Minister
for
Technical Affairs (STP), Temistocles
The radar system technology is based on
mobile and fixed 360 degrees-scanning
AN/MPQ-64 Sentinel radars, linked into
the company’s center command-andcontrol network to build a fully integrated
air surveillance picture.
The Mexican navy is supposedly also in
negotiations with the Russian defence
export agency, Rosoboronexport, for the
purchase of 12 new Sukhoi Su-27
“Flanker” air superiority fighters. If
acquired, the Su-27s would have a primary
patrol and anti-terrorist role of defending
key Mexican assets, littoral and maritime
air space.
PERU
Natural gas production in Peru rose 51% to
217.8 MMcf/d in Jun.2006 compared to
144.7 MMcf/d in May.2006, according to
26
figures released by Perupetro. The
Camisea natural gas project boosted output
by 60% in Jun.2006 to meet rising demand
from electricity generators Edegel SA and
Etevensa SA.
Oil and liquid gas production in Peru rose
3.4% to 119,695 b/d in Jun.2006, a nineyear high. Buenos Aires-based Pluspetrol
SA, Peru’s largest oil producer, increased
its production by 5.5% to 47,201 b/d, while
Brazil’s state-controlled Petroleo Brasileiro
SA (Petrobras) increased its production by
1.1% to 13,066 b/d.
PUERTO RICO
Petrobras announced it will sell $500mm
in fuel oil to the Puerto Rico Electric
Power Authority, the island’s statecontrolled energy generator.
Under the contract, Petrobras will provide
the company with 9.5 million barrels of
fuel with a 0.5% sulphur content between
Jun.2006 and May.2007. Puerto Rican
authorities announced the fuel will be used
to power thermo-electric power plants.
TRINIDAD &
TOBAGO
Trinidad & Tobago is considering
exporting liquefied natural gas (LNG) from
a planned fifth LNG train to Mexico. The
fifth train would have a capacity of 800
MMcf/d, and would be a joint venture
between the T&T government and private
industry partners.
Sources in Mexico say the Altavista LNG
plant could use 500 MMcf/d or nearly 65%
of the proposed fifth train’s capacity.
Methanol Holdings signed a $1.2bn loan
agreement with German-based KfW IPEXBank to fund the construction of an
estimated $1.5bn AUM complex. The Point
Lisas based complex will be comprised of
seven (7) plants.
Trinidad’s Phoenix Park Gas Processors
Ltd. and the South African firm, Isegen
Pty Ltd., announced plans to construct a
$64mm maleic anhydride plant in the
Caribbean island nation. Maleic anhydride
is a chemical commonly used in the
production of food additives, agricultural
chemicals, fiberglass and plastics.
Construction is slated to commence by
YE:08 and is estimated to last between 1824 months.
Partners in Phoenix Park include stateowned Natural Gas Company (51%
WI); ConocoPhillips (39% WI) and Pan
West Engineers and Constructors Inc.
(10% WI).
URUGUAY
Uruguay’s Energy Ministry implemented
a mandatory energy-saving plan, amid
scarce rainfall, as the nation’s
hydroelectricity generators lack power;
thus, forcing the nation to rely on thermal
power generators that burn costlier fuel
oil and diesel. Uruguay has four (4)
hydroelectric plants that during periods
of normal rainfall provide sufficient
electricity to meet the nation’s demand
for energy.
Some of the obligatory energy-saving
measures stipulate that public and
commercial buildings must reduce
interior and parking lot lighting by 50%
as well as cutting off at least 50% of their
elevators and escalators. Further,
decorative lighting of outside porches,
facades, gardens, and entrances must be
turned off only providing essential
illumination for security purposes.
VENEZUELA
Venezuela’s Ministry of Energy and
Petroleum (MEP) announced that it will
begin to cancel a predicted increase in
commercialization retail margins, a
payment that was authorized on
May.22.2006.
The Distribution Department of the MEP
announced that PDVSA – Distribution
Venezuela would begin to cancel the
margin increase announced for the
months of May.2006 and Jun.2006 as
soon as the adjustment to the system was
finalized.
The announcement was to have increased
the commericialization margins for
gasoline sold to motorist by Bs6.51
Bolivars per liter ($0.003 per liter) at
service stations and Bs3 Bolivars per liter
($0.001 per liter) for the transportation
companies.
Venezuela’s President Hugo Chavez and
Libya’s Muammar Gaddafi, discussed
issues related to energy development
throughout South America. The leaders
discussed topics such as Libya’s
experience with gas and how both
nations could advance commitments
within OPEC.
The
Venezuelan
taxing
authority,
SENIAT, billed three ((3) petroleum
companies in Venezuela for unpaid taxes:
Repsol-YPF was billed for $8mm;
Vinccler Oil and Gas CA was billed for
$15.6mm; and Compania General de
Combustibles SA was billed for $2.7mm.
Russia’s state-controlled oil company,
Gazprom, signed a contract with PDVSA
for the medium-to-long-term development
of the South American nation’s natural gas
sector.
Per the contract, Gazprom will assess
Venezuela’s reserves, estimate the demand
for gas in the nation and assist in the
planning activites as regards the extraction,
transport, storage and treatment of natural
gas in Venezuela.
Venezuela announced it is interested in
working with Ethiopian to share its
experiences related to the exploration and
the extractions of hydrocarbons as well as
in the areas of health care, education, and
various social services.
Iran’s state-owned Petropars oil and gas
company announced it will invest nearly
$4bn in the exploration and development of
two oilfields in Venezuela.
VENEZUELA. PDVSA delayed the
delivery of its gasoline shipments from
Jul.2006 to Aug.2006 due to operational
problems caused by a recent fire at the
Amuay refinery. The shipment was for
250,000-310,000 b/d.
The fire at the 640,000 b/d Amuay refinery
causing a partial shut down at the refinery
and a reduction in its crude oil operations.
The delays could have a significant impact
in the supply of gasoline in the US market.
“The shipment that PDVSA supplies to
CITGO in the northeast region of the US
could also be reduced as well as the
supplies of gasoline to CITGO service
stations in Florida,” according to an
operator in Houston.
CITGO hopes to cover the Venezuelan
deficit by looked for the products in
markets New York or in Europe.
27
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Technologies in Latin America
TWO SPECIAL PRINT EDITION SUPPLEMENTS
Print Date August 25, 2006
Print Date November 15, 2006
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Houston (1.281.733.5158)
Venezuela (58.0212.267.5837) or (58.0416.403.8945)
LATINPETROLEUM
Latin America’s Petroleum Magazine
28
ENERGY UPDATES
SOUTH AMERICA
29
BRAZIL
Petrobras approves shipyard hiring to build a dry dock
RIO DE JANEIRO. Petrobras’ executive board has approved the
hiring of the Rio Grande Shipyard to deploy a project the company
will use to build and repair semi-submersible oil production
platforms.
The bidding procedure, carried out by Rio Bravo Investimentos
concluded on July 3, 2006 after the agreement was signed.
The project’s main facility will be the Dry Dock, which will measure
130 meters x 140 meters and have a 13.8 meter draft. The
infrastructure will also include a wharf, steel-processing workshops,
and support areas.
The value the Rio Grande Shipyard proposed was R$222.890 million
Brazilian reais. The venture is expected to create upwards of 250 jobs
during the construction phase. The Rio Grande Shipyard, located in
the Rio Grande Harbor (Rio Grande do Sul state), is controlled by the
WTorre Group.
“Winning this contract reinforces Weatherford’s technology,
services, personnel and excellent safety performance,” commented
Bernard J. Duroc-Danner, president and CEO of Weatherford. “Over
the past three and a half years, our Brazilian operation has worked
closely with Petrobras to develop our DPR systems and service
operations. This collaboration has enabled us to exceed the initial
performance objectives and establish new standards within the
industry.”
Weatherford is investigating the potential for application of the DPR
technology in other deepwater markets worldwide. –
Petrobras awards drilling contract to Scorpion/Queiroz
RIO DE JANEIRO. Bermuda-based Scorpion Offshore entered into
a cooperation agreement with Queiroz Galvao Perfuracioes, S.A., a
Brazilian drilling company, whereby the two parties agree to work
together to pursue certain deep water drilling opportunities with
Petrobras in Brazil.
It is important to keep in mind that Petrobras will not operate the
undertaking, the infrastructure for which will be made available to
the companies that win the future platform tenders. By setting this
process into motion, the company’s intention was to build the dock
through an investor fund system.
Queiroz has been awarded a five-year drilling contract by Petrobras.
The Scorpion/Queiroz venture will be responsible for constructing a
2,400 meter water depth capable dynamically-positioned
semisubmersible. The contract is expected to start around mid-2009
after shipyard construction, sea trials, mobilization to Brazil and
customer acceptance.
Petrobras will lease the infrastructure for a 10-year period. The initial
plans foresee the building of four (4) offshore oil-production platform
hulls, a venture that will generate some 2,500 direct jobs in the region
where the infrastructure is installed.
Scorpion/Queiroz are in the process of forming a jointly-owned and
managed company to perform the Petrobras drilling contract and to
construct, own and operate the DP semisubmersible rig.
For Brazil and for Petrobras, having a dry dock available is a
strategic issue, as Brazil doesn’t have facilities of the sort available to
it at a size that allow for major semi-submersible platform
maintenance and repairs.
Scorpion anticipates that the DP semisubmersible can be constructed
for an all-in cost between $460 and $500 million, including financing
and start-up costs. The five-year drilling contract will generate gross
revenue of approximately $650 million, including mobilization. –
For this reason, these services have been carried out abroad, causing
the company to incur significant cost increases and not allowing it to
create jobs and income in the internal market. – LatinPetroleum.com
LP
Aker Kvaerner Wins Two-Year Frame Agreement
Weatherford Wins Drill Pipe Riser Contract from Petrobras
RIO DE JANEIRO. Weatherford International’s Brazilian
operations, based in Rio de Janeiro, has been awarded a five-year
contract worth approximately $87 million by Petrobras.
Weatherford will provide drill pipe riser (DPR) intervention systems
and services to be used for installation and intervention in subsea
wells within the Espirito Santos Basin.
This latest award further strengthens Weatherford’s relationship with
Petrobras for the provision of DPR Systems, which dates back to
2003 when Weatherford first entered this market. Weatherford
currently has four (4) DPR systems under contract to Petrobras.
Since 2003, Weatherford has made significant investment towards
establish itself as the industry leader for DPR intervention systems.
This response was client-driven, challenging Weatherford to expand
its existing core capabilities into the DPR realm for the development
of superior technology and services in the deepwater and ultradeepwater arena.
RIO DE JANEIRO. Aker Kvaerner Subsea Brazil announced it has
won a two-year frame agreement to supply subsea Christmas trees to
Petrobras. The contract has a value of approximately $84 million.
The scope of work comprises 30 subsea Christmas trees with
associated tools. The first call-off is to comprise nine (9) dual-bore
Christmas trees designed to 2,000 meter water depth plus associated
sets of tools. Deliveries are to be completed from Aker Kvaerner’s
facility in Curitiba, Brazil, for delivery in the next 12-months. The
duration of the frame agreement is two years, with an option to
extend by one year.
“This award confirms not only Aker Kvaerner’s performance and
close cooperation with Petrobras on previous similar projects, but
also Aker Kvaerner’s established position as a strong supplier of
Christmas trees in Brazil,” says Raymond Carlsen executive vice
president of Aker Kvaerner Subsea.
Aker Kvaerner has extensive experience delivering subsea trees in
Brazil, having delivered more than 130 subsea Christmas trees to
Petrobras since the start of operations in Brazil. –
30
PIFCo Announced Securities Buyback Tender Offer
RIO DE JANEIRO. Petrobras announced that its wholly owned
subsidiary Petrobras International Finance Corporation (PIFCo)
formally announced on July 18, 2006 a tender offer for the buyback
of its issued securities pertaining to five series of notes, as
summarized below.
Securities
CUSIP/ISI
N Number
Maturity
Fixed
Spread
(Basis
points)
Benchmark
US Treasury
Security
PIFCo
12.375%
Global StepUp Notes due
2008 (“StepUp Notes”)
71645WAF8 /
US71645WA
F86
April 1
2008
+35
4.625% U.S.
Treasury Note
due March 31,
2008
PIFCo
9.875%
Senior Notes
due 2008
(“2008
Notes”)
EC3844981 /
USG7028BA
A91*;
71646FAA5 /
US71646FAA
57;
71646FAB3 /
US71646FAB
31*
May 9
2008
PIFCo
9.750%
Senior Notes
due 2011
(“2011
Notes”)
71645WAB7 /
US71645WA
B72*;
EC4142831 /
USG7028BA
B74*;
71645WAA9 /
US71645WA
A99
July 6
2011
PIFCo
9.125%
Global Notes
due 2013
(“2013
Notes”)
71645WAG6 /
US71645WA
G69
July 2
2013
+125
4.250% U.S.
Treasury Note
due August 15,
2013
PIFCo
8.375%
Global Notes
due 2018
(“2018
Notes”)
71645WAH4 /
US71645WA
H43
December
10, 2018
+190
5.125% U.S.
Treasury Note
due May 15,
2016
+35
+70
2.625% U.S.
Treasury Note
due May 15,
2008
5.125% U.S.
Treasury Note
due June 30,
2011
Note** These Notes are authorized for negotiation in the regulated market of
the Luxemburg Stock Exchange.
The purpose of this initiative is to reduce total debt outstanding and
simplify the debt profile, thus benefiting from the company’s current
strong cash generation.
Some of these securities carry enhancement features which currently
do not contribute to accessing capital markets, since October 2005
when Moody’s Investor Services increased the rating of Petrobras
and PFICo to investment grade.
PIFCo has the option to limit the total volume of this buyback to $1
billion, in addition to the securities which have already been
repurchased in the past by PIFCo or its affiliated companies, which
may be eligible for inclusion in this Tender Offer.
Should the securities tendered exceed $1 billion, PIFCo may exclude
one or more of the series from the buyback operation, starting with
those series with longer maturities, in order to bring the total volume
in line with the $1 billion limit.
The tender offer buyback price will be the present value of the cash
flow generated by the security (face value and interest), with the
necessary adjustments to accord for the date of effective payment of
interest and final redemption, brought to present value based on the
yield of US Treasuries Benchmark at 4:00 p.m. in New York on July
20 2006, as announced in principle by Bloomberg, plus a fixed
spread (see accompanying).
Additionally, interest will also be paid for the period between the last
interest payment date of each security and the settlement date of this
tender offer.
Unless stated to the contrary, the tender offer is set to close at 5:00
p.m., New York City time on July 24 2006, and financial settlement
is to take place on the third business day there after.
Details of conditions and limitations of the tender offer are to be
found in the Offer to Purchase document, dated July 18 2006, which
can be obtained by accessing the Petrobras’ Investor Relations
website – Financial Information – Prospectus.
The operation is being arranged by Morgan Stanley Co.,
Incorporated, and UBS Securities LLC, which in their capacity as
Dealer Managers, are responsible for the calculation of the price of
the buyback offering of each security.
The remaining institutions involved in the operation are: The Bank
of New York, depository for the tender offer, The Bank of New
York (Luxemburg) S.A., the Luxemburg agent bank, and D.F. King
& Co., Inc., the information agent for the tender offer.
Requests for the Offer to Purchase and related documents should be
made to D.F. King & Co., Inc. by calling 1.212.269.5550 for the
banks and brokers or 1.800.859.8508, for other parties, or in writing
to 48 Wall Street, New York, New York 10005. Questions on the
tender offer can be made to Morgan Stanley & Co., Incorporated at
1.800.624.1800 (in the USA) or 1.212.761.1457 (outside the USA)
and to UBS Securities LLC on 1.888.722.9555, extension 4210 (in
the USA) or 1.203.719.4210 (outside the USA). –
Petrobras Charters $35.5 million PSV contracts
RIO DE JANEIRO. DOF ASA entered into an agreement with
Petrobras for a two-year charter for the newbuild Skandi Rio. The
charter will commence upon delivery of the vessel in October 2006.
The contract has a value of approximately $24 million.
Norskan Offshore Ltda. and Petrobras have agreed to extend the
contract for Norskan Leblon for two years from August 2006. The
contract has a value of approximately $11.5 million.
NorSkan Offshore Ltda of Brazil is owned by Solstad Offshore ASA
(50% WI) and DOF ASA (50% WI). – LatinPetroleum.com LP
Aker Yards to construct large vessel for DOF ASA
RIO DE JANEIRO. Aker Yards has signed a contract with DOF
ASA, through its subsidiary DOFCON ASA, for the building of a
large construction vessel. The value of the contract is approximately
NOK 720 million.
31
The vessel will be built by Aker Yards in Brazil, with planned
delivery for May 2009. This large construction vessel is an Aker
Yards design, called Aker OSCV 06 and is the fourth vessel of this
design under construction to DOF. The vessel is 138 meters long and
will be equipped with a 250 tons offshore crane. It will have DP
Class 3.
“This contract confirms our long and good relationship with DOF. In
our order book we now have thirteen (13) vessels to be delivered to
this innovative and dynamic owner,” according to Roy Reite,
responsible for the Offshore & Specialized Vessels business area in
Aker Yards. – LatinPetroleum.com LP
Keppel FELS/Technip Completes Hardest Part of P-52 FPU
Construction
RIO DE JANEIRO. The consortium of Keppel FELS and Technip
has completed the offshore mating of the 25,000-tonne topside and
the 4,500-tonne spider deck with hull structure, weighing 17,500
tonnes, for one of the world’s largest floating production platforms,
the P-52, in Brazil.
Considered the most challenging phases in the construction of the P52 platform, this deck mating operation is highly complex and
sensitive, and as such rarely carried out anywhere in the world.
This mega-operation comprises two major phases. The first phase,
which was concluded successfully in 24 hours on June 9-10, 2006,
involved placing the topsides deckbox, with all process modules
already pre-installed, onto the lower hull structure.
The second phase involved the risky hoisting of the three major
sections of the spider deck to join with the underside of the deckbox.
The successful completion of the operation took place at Jacuecanga
Channel near Keppel FELS Brasil’s BrasFELS Yard in Rio de
Janeiro, Brazil.
Brasil’s BrasFELS shipyard, where a 600-tonne flare boom will be
installed. The final hook-up of all systems is currently ongoing and
the final testing and commissioning stage will commence soon.
The P-52 is an 81,000-tonne (displacement) semisubmersible oilprocessing platform. Its primary components include the hull (which
remains partially submerged when it is operating in the oilfield), the
deck box, the processing modules, modules for energy generation,
gas compression, accommodation and utilities, and the helideck and
recreational facilities.
The construction agreement between the Keppel FELS/Technip
consortium and Petrobras was signed in December 2003 in the
presence of the Brazilian President Luiz Inácio Lula da Silva. Module
construction was distributed among several sites in Rio de Janeiro
and Niteroi. The accommodation module, the structure of which is
made out of aluminum, and the deck box, which houses all of the
modules, were built at Keppel FELS Brasil’s BrasFELS shipyard, in
Angra dos Reis.
The hull was built by Keppel FELS in Singapore and arrived in
Brazil late March 2006. With the entire topside being built in Brazil,
the national content is already at 71%, above the contractual level,
which is 60%.
Production is expected to begin in early 2007. When fully
operational, the P-52 semisubmersible platform will be able to
process 180,000 barrels of oil a day, compress 9.3 million cubic
meters of gas a day and inject approximately 300,000 barrels of water
into the reservoir.
To be deployed in the Roncador Field development program, in the
Campos Basin, the unit will be anchored at a depth of 1,800 meters
and be interconnected to the subsea systems comprising 68 risers (20
production risers, seven gas Lifts, 13 water injection, one oil export,
provision for one future oil export, one gas export, 23 utilities
umbilicals, and two service risers). – LatinPetroleum.com LP
Petrobras reports oil in the new frontier area offshore Brazil
The first-phase operation was carried out after detailed planning and
an extensive and careful safety assessment process. The P-52’s hull
was anchored and submerged to a predetermined depth of 40 meters,
using a ballasting procedure, at the precise location and under
suitable weather and tide conditions. BrasFELS’s FS1 barge, on
which the topside deckbox was built, was then positioned between
the hull columns with the assistance of a winch system. During the
operation, the distance between the barge and the hull columns were
just 1.5 meters apart. With gradual deballasting, the hull emerged,
lifting the topside off the barge and gradually taking the full load of
the topsides through the four columns.
RIO DE JANEIRO. A consortium made up of Petrobras, BG and
Petrogal have made a light oil find at well 1-BRSA-369A-RJS (1RJS-628A) in ultradeep waters in the Santos Basin along a new
exploratory frontier.
The discovery of this new reservoir represents a milestone for
Brazilian oil exploration, being the first well to surpass an evaporatic
salts sequence of more than 2,000 meters thickness. The well, which
is still being drilled, is located at a water depth of 2,140 meters and is
the first drilling to take place in the BM-S-11 block, about 250
kilometers from the southern coast of the city of Rio de Janeiro.
After this sensitive operation, the second-phase mating began.
It began with towing the barge BS-3, on which the central part of the
spider deck was built, to between the columns of the lower hull. Once
it was in the intended location, the lower hull was ballasted down so
that the hoist wires from the spider deck could be connected to the
deckbox. After this operation, the hull was again deballasted to a predetermined depth so that another barge, BS-5, on which the port and
starboard sides of the spider deck sections were built, could be towed
laterally between the columns. Once again, when the spider deck
sections were in the right location, the lower hull was ballasted so
that the hoist wires could be connected between the spider deck
sections and deckbox.
With these naval operations concluded, the P-52 floating production
platform, in its final configuration, was towed back to Keppel FELS
Since this is a new exploratory frontier area, preliminary results are
highly significant. However, further investments will be necessary for
fully evaluating the volume and productivity of the reservoir.
Partners in the block include Petrobras (Operator, 65% WI), Britishowned BG (25% WI) and the Portuguese company Petrogal (10%
WI).
Pursuant to the current legislation, the find has been notified to the
National Petroleum Agency (ANP). – LatinPetroleum.com LP
Altantia Offshore receives letters of intent for orders in Brazil
32
RIO DE JANEIRO. Three Letters Of Intent have been received end
of last week by Atlantia Offshore Limited, a fully-owned subsidiary
of SBM Offshore N.V., from several Brazilian drilling contractors in
the wake of major drilling contracts recently awarded by Petrobras
for their deep offshore development plans. Under these LOI’s,
Atlantia would provide on lumpsum turnkey basis, possibly several,
newbuilt dynamically positioned drilling units.
The units will be built according to the GustoMSC TDS2000 design,
already proven through existing drilling rigs operating worldwide.
The units will be able to operate in water depths up to, either 2,000 or
2,400 meters at clients’ option, and be capable of drilling up to 7,500
meters below the seabed. They will feature state of the art drilling
equipment and dynamically positioning systems.
Each unit represents a portfolio value of around $370 million for
SBM turnkey sales segment. Contract award is subject to successful
negotiation of Terms and Conditions with the respective clients,
which will take place during the coming weeks.
The delivery times of the units will be ranging from 30-42 months
from contract award.
The company has completed the sale to Malaysian International
Shipping Company Sdn Bhd (MISC) of two group companies
respectively owning and operating the Roncador (Brasil) FPSO,
which is currently on a long term charter to Petrobras.
The effective date for the sharing of Roncador FPSO revenues and
costs is April 1, 2006. The transaction represents sales revenue of
$103.7 million, and will generate a profit in excess of $10 million. –
Petrobras is the first Latin American Company on the United
Nations Global Compact Committee
performance lines: Young people and adult education and
professional qualification; job and income generation; guarantee of
children and adolescent rights; social projects; and corporate
volunteerism.
Move-Brazil: This is one of Petrobras’ most significant actions in the
education area. Created in August 2003, in 2005 the project
alphabetized 13,250 young people and adults who did not have
access to regular schooling during their childhood.
Respect for human rights in all activities undertaken by company,
which offers courses and training to its employees.
Labor
Permanent dialogue with the Single Oil Worker's Federation
(Federação Única dos Petroleiros, FUP) and with the labor unions.
The company has faced no labor strikes in the past three years.
There is no ethnic, gender, age, religion or sexual orientation
discrimination at Petrobras. Equality, with respect for differences, is
practiced from the moment the person is hired through public
contests.
Environment
Nine Environmental Defense Centers and a Crisis Communication
System have been deployed nationwide.
Operation impact control through an Atmospheric Emissions
Management System, via the Corporate System for Residue and
Impacted Area Management, and with the Computerized System to
Support the Emergency Action Plan.
Reduction of its operations’ oil, natural gas, and byproduct
consumption.
RIO DE JANEIRO. Petrobras participated in the first United
Nations Global Compact Committee meeting, under the coordination
of Kofi Annan, the UN’s general secretary, on June 28, 2006, in New
York. The only Latin American company on the Committee,
Petrobras was represented by its president, José Sérgio Gabrielli de
Azevedo.
Contribution to greenhouse effect gas emission reductions. In 2005,
the reduction was equivalent to 2,700 barrels of oil a day.
Petrobras was selected because of initiatives it carries out which are
engaged in social responsibility, and which highlight not only ethical
and transparent relationships in environmental preservation actions
but also respect for human rights and labor conditions.
Petrobras has no record of any wellspring having been significantly
impacted by water capitation performed by its operations or by the
launch of liquid residues in them. In 2005, seven units concluded
water re-usage studies.
The Global Compact brings companies from the entire world together
that are committed to the nine human rights, labor conditions, and
environment principles. Formed by 25 members, the Global Compact
Committee includes representatives of companies, business and
worker associations, and of other civil society organizations.
The Petrobras Environmental Program, the motto of which is “Water:
fresh and sea water bodies, including their biodiversity,” invested
R$40 million in 2004/2005 and is expected to invest R$48 million in
2006.
Petrobras adhered to the United Nation’s Global Compact voluntarily
in 2003. The company was elected a Committee member because it
was proven it applies the Pact’s principles to its most diverse
activities. In 2005 alone, Petrobras appropriated R$518 million
Brazilian reais to social and environmental responsibility projects.
Leak volumes were reduced in 2005, leveling out at 268 cubic meters
compared to 530 cubic meters in 2004. This was the second best
result in six years.
Diesel S500, with 75% less sulfur content, hit the market in 2005,
contributing to improving air quality in the major Brazilian urban
areas.
The production of the lower-sulfur content Podium gasoline was
increased.
The following are a few of the projects and actions that show the
company’s commitment to the Global Compact’s principles.
Project development to build pilot and commercial scale aeolian
energy units.
Human Rights
Transparency
Petrobras Zero Hunger Program: This program sets more than two
thousand workers into motion through 32 projects in five
Codes of Ethics, Good Practices, Competition Behavior, and Federal
Senior Administration Behavior.
33
The company fights all types of corruption and improper privileged
information use, according to the Securities Exchange Commission
(SEC) rules.
Petrobras’ corruption combating policies cover all of its vendors and
workforce.
The Ombudsman’s Office was implanted as an important instrument
for transparency with several publics. Opinions, suggestions,
criticism, complaints, and deletions are investigated and the due
measures are adopted.
Annual publication of the Social Balance aiming at rendering
accounts on the company’s social and environmental actions to the
society.
Vendor Management
Petrobras carries out several initiatives aimed at having an ethical and
transparent relationship with its vendors, in addition to encouraging
their development, social responsibility and sustainability. These
initiatives include:
Vendor Management Program (PROGEFE): Instituted in 2003 in
the Engineering area, this is an instrument that is used to evaluate the
companies that are contracted and it obeys the Safety, Environment
and Health (HSE) and Social and Environmental Responsibility
criteria which are part of the qualification process for a company to
be entered in Petrobras’ vendor reference file.
Program to Mobilize the National Oil and Natural Gas Industry
(PROMINP): Developed by the Mines & Energy Ministry, with
strong Petrobras participation, this program seeks to maximize the
Brazilian goods and services industry’s participation, on competitive
and sustainable bases, in oil and gas project deployments in Brazil
and abroad. One of its initiatives is the Professional Qualification
Plan that will qualify 70,000 professionals by the end of 2007.
Petrobras will invest approximately R$200 million in the Plan in
2006 and 2007.
Petrobras/Sebrae Agreement: This agreement seeks to insert micro
and small companies in the oil and gas productive chain in a
competitive and sustainable manner. The target public represents
99% of the formal companies in Brazil, which account for 26% of the
country's salary mass and for 57% of its formal jobs. Fourteen
projects have already been developed, with investments in the order
of R$28.7 million, in 12 Brazilian states that explore, produce and/or
refine oil and gas. – Petrobras via LatinPetroleum.com LP
OTHER ANDEAN
PDVSA initiates exploration activities in Bolivia
BOLIVIA. Venezuela’s state oil company, Petroleos de Venezuela
(PDVSA) announced it has begun studies to identify potential
exploratory areas in Bolivia, according to a General Manager of the
company, Miguel Tarazona.
“We are studying four (4) blocks to determine and quantify the
amount of reserves before we commence exploitation and exploration
work,” according to Tarazona. “Once we have the results of the study
we will then be able to determine how much needs to be invested.”
The latest actions stem from an energy agreement signed in May
2006 in La Paz by Bolivia’s President Evo Morales and Venezuela’s
President Hugo Chávez. Under the agreement, Bolivia agreed to
allow PDVSA to participate in exploration and production activities
in the nation while Venezuela agreed it would abide by the terms
stipulated by Bolivia, including forming a joint venture with YPFB.
Bolivian and Venezuelan authorities announced that the anticipated
investment from Venezuela over the long-term could reach $1.2
billion.
The investments by PDVSA would be made in non-traditional areas
such as those found north of La Paz which is an area with diverse
terrain. – LatinPetroleum.com LP
YPFB: “Brazil Ambassador’s affirmation as bad message”
BOLIVIA. In statements to the local press, the Brazilian ambassador
to Bolivia indicated that by applying the General Supply Agreement
(GSA) contract, his nation had already accepted paying $4/MMbtu
from July 1, 2006 and does not consider a reference to the $5/MMbtu
Argentina will pay, because Brazil has a different contract, for 20years, until 2019.
The GSA Contract is adjusted by means of a formula that every 4months modifies the referential price of Bolivian gas and, which
fundamentally is based on the cost in the Sao Paolo market of the
four (4) fuels which supply this industry.
Observations
Nevertheless, the president of YPFB, Jorge Alvarado Rivas, thinks
that the Brazilian ambassador, Antonino Mena Goncalves, gave
incomplete information and a “bad message” as regards negotiations
to modify the price of the gas that Bolivia sells to Brazil.
“I believe that Goncalves is sending incomplete information and this
I believe gives a bad message when we are conducting this type of
negotiation,” affirmed the chief of YPFB, Jorge Alvarado.
YPFB this past June 29, 2006 suggested it would raise the price of
the gas that it sells to Petrobras, after having agreed with Argentina
a raise the tariff to $5/MMBtu until year-end 2006.
According to Petrobras, the new tariff was increased by 10% with
respect to the $3.73/MMBtu price that it paid in May 2006, applying
a gradual method of adjustment that the contract stipulates.
Nevertheless, the YPFB president underlined that the agreement
additionally establishes that every 5-years, a term already completed
in 2004, anyone of the parties could suggest the modification of the
prices.
The results of the study would determine the future amount the
company would be willing to invest in the nation, said Tarazona.
Alvarado avoided revealing the price officially suggested to Brazil,
but reiterated that in the Brazilian market, Bolivian gas replaces fuels
that have a present value of $7.50/MMbtu, although it includes the
cost of the transport of about $1.50/MMBtu.
Soon, PDVSA will have to sign a joint venture agreement with
Bolivia’s state oil company, Yacimientos Petrolíferos Fiscales
Bolivianos (YPFB).
“These are arguments that are being used to revise the price. We are
not saying what the price will be because that has to be part of the
negotiation,” he indicated.
34
June 29, 2006 began the 45-days stipulated in the Bolivian-Brazilian
contract as the period in which to reach an agreement or to resort to
an international arbitration, which the La Paz government expects to
win, according to Alvarado. – LatinPetroleum.com LP
Repsol-YPF, Petrbras accused of altering measuring controls in
audited fields
BOLIVIA. The Bolivian government reported that during a rigorous
audit of the Margarita and San Antonio oil fields previously operated
by Repsol-YPF and Petrobras, respectively, that it discovered the
natural gas measuring controls had been altered.
Bolivia’s Vice Minister of Hydrocarbon Exploration and Production,
Julio Gómez, said the audit process will be like opening the “black
boxes” of the petroleum companies.
“Thirteen (13) of the control measures are not working and cannot be
read due to abnormalities,” affirmed engineer Moral Wilbor David.
“YPFB has already been notified and a repair order has been sent in
for the repairs.”
Three engineers from YPFB are conducting audit work in the fields
as it relates to measuring the production of crude oil, natural gas and
residuals.
Another fiscal engineer with YPFB, Edgar Gutiérrez, the person in
charge of the Sábalo plant in San Antonio, announced the executives
from Petrobras did not fully cooperate with the work that was
entrusted to it by YPFB. – LatinPetroleum.com LP
Bolivia to respect the Hydrocarbon Law when making
distributions
BOLIVIA. The Bolivian government announced it will respect and
fulfill the mandate of the Hydrocarbon Law, paying departmental
exemptions, the Direct Tax on Hydrocarbons (IDH by its Spanish
abbreviation) and calculations for national participation of
$4.77/MMbtu for the natural gas to be exported to Argentina.
The president of YPFB, Jorge Alvarado, assured that no hydrocarbon
producing region would be affected by a supposed reduction of
taxable income as the distribution of income derived from natural gas
would be based on “the real price.”
The price available at the border is $5/MMbtu before taking into
account the cost of transportation. In the case of Argentina, this cost
to transport natural gas to the nation is $0.23/MMbtu. As such, the
50% fiscal participation for Bolivia will be calculated based on
$4.77/MMbtu instead of $5/MMbtu.
This will be the value that the will be used by government officials to
calculate the payments to the nation’s coffers, especially for the
Tarija and Santa Cruz fields where nearly all of the natural gas is
shipped to Argentina. – LatinPetroleum.com LP
because the sector is indirectly feeling the affects of decisions made
by Morales’ administration.
The meeting with Morales’s administration is crucial as the mining
co-operatives hope to solve a number of outstanding issues that have
arisen of late.
The mining co-operatives, which number around 50,000 associates,
feel they have not received the support of the Morales government
even though the ex-president of the mining co-operatives, Wálter
Villarroel Morochi, was named the Minister of Mining and
Metallurgy. – LatinPetroleum.com LP
Equipo de Servicios Petroleros awarded national and regional
excellence awards
COLOMBIA. Equipo de Servicios Petroleros Ltda., a subsidiary of
international energy services company John Wood Group Plc,
which performs operations and maintenance services for
BP/Ecopetrol in Colombia, has received awards for national and
regional excellence in the zero accidents category for 2005.
ARP Suratep, a professional risk management entity, chose Equipo
in first place for having zero accidents in 1,460,000 man hours
worked during 2005. The awards are a reflection of Equipo’s daily
safety practices and high health, safety and environmental (HSE)
standards. Equipo was also the second place recipient of this award in
2004.
“These awards recognize our excellent safety performance which is
achieved through the high quality of the HSE management and
practices carried out daily by employees at Equipo,” said Arturo
Diaz, president of Equipo. “We are honored to receive these awards
as they reflect our commitment to safe operations and zero injuries as
we serve our customers.” – LatinPetroleum.com LP
Colombian-Venezuelan pipeline construction begins July 8, 2006
COLOMBIA. The construction of a 230 kilometer natural gas
pipeline kicked-off on July 8, 2006 as all the necessary studies have
been completed as regards to developing the infrastructure for the
cross-border project.
“By May of 2007 the initial natural gas molecules will flow through
the Transguajiro gas pipeline that will send gas from Colombia to
Venezuela,” according to Jorge Luis Sanchez, the President of Ente
Nacional del Gas (Enagas).
The pipeline will start at the Punta Ballenas offshore field in Guajira,
Colombia and will end in Maracaibo, Venezuela.
The pipeline will have a capacity to transport 150 MMcf/d of natural
gas and will be used to help Venezuela fill a natural gas supply
deficit in the Western region of Zulia state.
The future of Bolivia’s mining sector to be debated
The completion of this project will be the first for Venezuela as it
relates to international negotiations and the shipping of natural gas
through cross-border pipelines.
BOLIVIA. Bolivia’s mining co-ops met with President Evo Morales
to debate the future of the sector, which is experiencing good times
due to the high prices for minerals in international markets.
“This it is a very important step for binational integration,” according
to the Colombian Ambassador to Venezuela, Carlos Rodolfo
Santiago.
Recently, the mining sector officials informed Morales that he needed
to clearly define his political motives with the mining co-operatives,
Santiago added that the construction of the pipeline would
demonstrate the brotherhood that exists between both nations. –
35
18,306,173 shares were subscribed for, resulting in total gross
proceeds of $68.6 million.
Guajira region to receive $9.3 million for social investment
projects
COLOMBIA. Venezuelan President Hugo Chávez announced social
investments related to the Colombian-Venezuelan natural gas
pipeline will reach $35.5 million or 10% of the estimated $335
million cost of the pipeline. The president added that the transCaribbean pipeline would form part of a new integration between
Venezuela and Colombia.
The pipeline will be the center of the integration process and the
beginning of other work that will be conducted jointly between
Colombia and Panama, according to the president.
The construction of the pipeline is estimated to generate 6,000 jobs in
Venezuela and another 4,000 in Colombia. Another 150,000 people
located in and around the communities where the pipeline will pass
are expected to benefit indirectly from the pipeline’s construction.
The offering was comprised of a 16,000,000 common share issuance
from treasury with the remaining shares being issued as a secondary
offering. Haywood Securities Inc. acted as underwriter in the
transaction. Petrominerales has 95 million common shares
outstanding. Petrobank holds approximately 80.7% of the issued and
outstanding shares of Petrominerales.
Directors, officers and employees of Petrobank and Petrominerales
subscribed for 1.2 million shares or approximately 7% of the
offering.
Of the net proceeds received from the treasury portion of the offering,
Petrominerales expects to use $31.5 million for development drilling
and recompletions on current producing properties, $10 million for
drilling on exploration properties, $7 million for repayment of debt to
Petrobank, and the remainder for general and administrative expenses
including working capital.
Chávez said, “Homes, productive projects, a center of endogenous
development, community property and a lot of social security can be
derived from the social investment to be made by Colombia and
Venezuela.”
Petrominerales share commenced trading on the Toronto Stock
Exchange on June 29, 2006 under the symbol PMG. –
Chávez announced that constructive agendas where needed so that
Colombia and Venezuela could over come their differences so that
they could jointly do things that would translate into beneficial
projects for both nations.
Petrobank recommences drilling on the Orito block in Colombia
“We need to cooperate in order to rid our nations of numerous evils,
such as the insecurity and kidnappings,” said Chávez. –
Colombia to adjust ruling for the sale of Venezuelan gasoline
COLOMBIA. The Colombian government announced that it would
adjust the rulings for the importation of Venezuelan gasoline so that
the maximum level of crude oil purchased from its neighbor does not
exceed those fixed by Colombia’s Energy and Mining Planning
division.
The ruling looks to avoid that excess gasoline imported from
Venezuela that is distributed in the border areas of Araucan, Guainía,
Vichada, North Santander and Guajira, and later resold to other
regions of Colombia.
In the decree established by the Colombian government, the
municipality of Arauca is the only one authorized to “import fuel
from Venezuela for redistribution.”
Officials in Bogotá announced that the distribution points in the
nearby municipality of Arauquita do not allow for the easy
monitoring of the fuel that enters and leaves the area.
According to the president of Venezuela’s National Federation of
Hydrocarbon Carriers, Alexander Perez, “The illegal importation
of fuel is the main cause of supply shortages along the Venezuelan
border zones.” – LatinPetroleum.com LP
Petrobank closes Petrominerales initial public offering
COLOMBIA. Petrobank Energy and Resources Ltd. closed the
initial public offering (IPO) of the common shares of its subsidiary,
Petrominerales Ltd. The offering was priced at $3.75 per share and
COLOMBIA. Petrobank Energy and Resources Ltd.’s Latin
American Business Unit recently recommenced drilling activity on
the Orito block with the arrival of the first of two contracted Nabors
drilling rigs. The first location being drilled with this rig, Orito 119,
has now reached the top of the targeted Caballos formation, three (3)
days ahead of schedule. The well is expected to reach total depth in
the soon and be completed and on production within the next three
(3) weeks.
Petrobank plans to utilize its new completion design, which
incorporates a fracture stimulation of the upper Caballos sands that
has resulted in significantly enhanced production capability in the
company’s Orito 117 and 118 wells and in certain other recent
recompletions.
A second Nabors rig is scheduled to arrive in Orito later in the second
quarter of 2006. This additional rig will also be used to drill
Petrobank’s first four (4) exploration prospects on the company’s
Llanos Basin exploration blocks early in 2007.
Petrobank also announced it recently deepened its Orito 113 well,
which was originally terminated in the uppermost Caballos sands.
This deepened well encountered further productive pay in the lower
Caballos sands including the A sand, which was perforated and
produced clean oil on initial swab testing. The well is being
perforated and fracture stimulated in the B, C and D sands and is
scheduled to be brought back on production by mid-July 2006.
PetroBank also announced it has secured the required drilling
equipment and capital required to fund its wide array of development
and exploration opportunities in Colombia.
Whitesands Operational Update
The Pre-Ignition Heating Cycle (PIHC) is well advanced on the first
well pair at Whitesands. The heated bitumen zone in the vertical
injection well has continued to expand, indicating increased bitumen
mobility around the well. Production from the horizontal well has
achieved total fluid production rates of over 600 barrels per day (b/d),
with steadily increasing bitumen cuts. The rising temperature in the
36
reservoir around the vertical injection well, as indicated by
Petrobank’s observation wells, along with the production of high
volumes of condensed steam and bitumen indicates that the company
has established a mobile bitumen zone around the vertical injection
well.
This reservoir response indicates that Petrobank is achieving
transmissibility from the vertical injection well into the horizontal
production well, which is a key step in creating the final conditions
required to begin air injection.
To increase operational flexibility and to enhance final reservoir
conditioning, an additional temporary steam generator has recently
been added. This will advance the termination of the PIHC process in
the first well pair and allow for air injection to commence soon. This
will also provide enhanced operational flexibility and increased
efficiencies for the PIHC process in the remaining two (2) well pairs.
– LatinPetroleum.com LP
The Colombian company, Carbopetrol was assigned the Andino Sur
block located in the upper Magdalena Valley. The area has an
extension of approximately 7,000 hectares. The first stage of the
exploratory plan will span 18-months with investments that will
approximate $0.385 million.
The Colombian company CleanEnergy Ltda. was assigned the
Canaguaro block located in Los Llanos. The area has an extension of
approximately 10,000 hectares. The first stage of the exploratory plan
will span almost 6-years with investments that will approximate
$0.785 million.
The ANH expects to sign 30 E&P contracts in 2006. To date in 2006,
the ANH has signed 21 E&P contracts and ten (10) technical
evaluation agreements. – LatinPetroleum.com LP
PetroEcuador calls for tender for NAPO crude oil
Colombia’s ANH signed six (6) E&P contracts in June 2006
COLOMBIA. Colombia’s Agencia Nacional de Hidrocarburos
(ANH) or National Hydrocarbon Agency, signed six (6) exploration
& production (E&P) contracts in June 2006.
The US-based Occidental Petroleum Corporation was assigned the
Macaurel block located in the upper Magdalena Valley. The area has
an extension of approximately 49,000 hectares. The first stage of the
work plan will span 5-years with investments that will approximate
$2.5 million.
ECUADOR. PetroEcuador summoned an international tender for
the sale of Ecuadorian Napo crude oil, as Ecuador could not reach an
agreement with the Venezuela government whereby Venezuela’s
state oil company, PDVSA, would refine Ecuadorian crude oil.
PetroEcuador announced the invitations to participate in the tender
included the names of 50 companies classified to purchase the
Ecuadorian crude oil. Among the list of companies are also the state
oil companies with which Ecuador has strategic alliances, such as
Colombia, Venezuela, Chile, Peru, Uruguay, Finland, Brazil, among
others.
The bid price for the petroleum to be refined corresponds to the same
price that Ecuador was negotiating with Venezuela.
PetroEcuador informed that the tender is for the sale, during an eightmonth timeframe, as of August 2006 for 72,000 barrels per day of
Napo crude oil. The oil will be sold in six (6) lots of 12,000 b/d each.
The Napo crude oil comes from the Block 15 oil fields operated until
May 2006 by the US-based Occidental Petroleum Corporation.
Ecuador recently took over the operations of Occidental, claiming the
company sold its interest in an Ecuadorian block without the consent
of the government.
Ecuadorian Minister of Energy, Iván Rodriguez, announced that the
government was not impressed with the offers from PDVSA and
hinted that it was considering calling for an international licitation. –
Ecuador rejects PDVSA’s refining offer
The Texas-based company, Omimex, was assigned the Tiburón
block located in the Guajira river basin. The area has an extension of
approximately 199,753 hectares. The first stage of the work plan will
span 6-years with investments that will approximate $2.4 million.
Hocol was assigned the Samán block located in the lower Magdalena
Valley. The area has an extension of approximately 240,000 hectares.
The first stage of the exploratory plan will span 9-years with
investments that will approximate $3.55 million.
The Texas-based company, Argosy was assigned the Mecaya block
located in the Putumayo river basin. The area has an extension of
approximately 30,000 hectares. The first stage of the exploratory plan
will span 4-years with investments that will approximate $3.2
million.
ECUADOR. Ecuador’s Energy Minister, Iván Rodriguez, rejected an
offer presented by the Government of Venezuela whereby the nation
would refine Ecuadorian crude oil.
Rodriguez indicated that he had received a letter from the President
of Venezuela’s PDVSA, Rafael Ramirez, outlining Venezuela’s
offer.
According to Rodriguez, the Venezuelan offer did not provide a
minimum agreed upon amount that would be saved by Ecuador for
selling its oil to Venezuela.
Only two-months ago, Ecuador’s state oil company, PetroEcuador
and PDVSA signed a strategic alliance that included the possibility
37
that Venezuela would refine up to 100,000 barrels per day of
Ecuadorian crude oil at Venezuelan refineries.
In order to close the alliance, Ecuador had stated that it needed
PDVSA to offer it an anticipated savings of $200 million per year.
Venezuela had assured that Ecuador would save around $179 million
per year. – LatinPetroleum.com LP
Ecuador temporarily reduces fuel shipments
ECUADOR. Ecuador’s National Hydrocarbon Agency or
Dirección Nacional de Hidrocarburos (DNH) announced it will
temporarily reduce fuel shipments to the four (4) border provinces of
El Oro, Carchi, Loja and Esmeraldas. The agency also announced it
has still not decided whether to prohibit the sale of derivatives to cars
with Colombian license plates.
The decision was taken in light of the decision by several gas station
proprietors to stop buying and dispatching fuel, an issue that is
causing problems in the four cities.
“This project was developed in the chambers when the energy crisis
began. In the last few years, the price of energy has made a difference
in the nation. In the central mountain region it is more expensive than
in Quito and Guayaquil,” explained Jorge Jara, president of
Chimborazo’s Production Chamber Corporation. “That’s scaring
investors who are trying to install a factory in Riobamba.”
Weeks ago, this Chamber presented the proposal to the directors the
Riobamba Electric Company (Eersa), because it will need its
support for the construction. The Chamber is also in contact with
foreign industrialists to finance the project, which will cost $9.5
million.
So far, $3 million is assured from the newly constituted company,
Riobamba Hidroelectrica -HidroRiobamba S.A.
The previous month, the Chamber’s directors met with European and
Panamanian industrialists and next week a group from Panamanian
investors will arrive to identify the proposal and the possible sites
where the job could be set up.
Ecuador’s Energy Minister, Iván Rodríguez, called for a meeting
with representatives of the merchandisers that handle the automotive
sector for June 10, 2006, with the purpose of coming to a consensus
regarding control measures for the illicit sale of derivatives.
According to the National Electricity Council, in Chimborazo, eight
(8) plans can be carried out, with a generation capacity of between 8
and 14 megawatts. – LatinPetroleum.com LP
Recent rationing at the Machala gas stations resulted in long lines of
vehicles that were looking for extra gasoline and diesel. The impact
of the rationing was also felt in Pasaje, El Guabo, Santa Rosa and the
Huaquillas border.
Politechnical (Espol) looks to explore for more petroleum in
Ancón
Officials announced that the restrictions in the provinces are around
45%. That is to say, the average monthly dispatch of six (6) million
gallons is now only to 2.7 million.
ECUADOR. Ecuador’s Politechnical School of the Coast (Espol)
announced it is analyzing the proposal from a foreign company that
has expressed interest in investing oil exploration activities in Ancón,
located in the peninsula of Santa Elena. The project would be
developed and located some 5-10 meters offshore.
The Ecuadorian Distributors’ Association, the Drivers’ Syndicate,
taxi drivers and shrimp and fishermen unions mounted a protest to
oppose the restricted sale.
The director of the Espol, Moisés Tacle, maintains that the
negotiations are quite advanced and soon an agreement could be
signed by both parties
The region of Ibarra was the fueling destination for some vehicle
owners that began to feel the effects of the irregular sale of fuel in
Carchi.
“The foreign company is ready to invest and also assume all the
exploration risks,” according to Tacle. “The company also
understands that part of the offshore region of Ancón has never been
explored.”
Oswaldo Enríquez, a driver, announced he went to all the gas stations
in Tulcán and only found fuel in the Petrocomercial, located in the
sector of Rumichaca.
Germán Macas, a taxi driver who makes frequent trips to Rumichaca,
said he only had enough fuel to last until afternoon.
“I will have to buy my fuel in Ipiales.”
The gallon of gasoline in the neighboring nation is about 6,000 pesos
($2.40) whereas in Ecuador it is $1.48/gallon.
Although the company has not announced how much it plans to
invest, work would be focused on exploratory drilling to look for oil
offshore. According to Tacle, seismic work will need to be conducted
prior to the commencement of drilling activities.
It has been nearly 70 years since exploratory activities were
conducted in Ancón, a region that currently produces about 2,200
barrels per day. Espol has assumed the administration of oil
operations for some time in the peninsula and now the school is
looking to increase petroleum income from the region.
Nevertheless, Roberto Serrano, Hydrocarbon undersecretary,
announced that there is enough fuel in Ecuador to serve the nation’s
border regions. – LatinPetroleum.com LP
Espol expects that a portion of the income generated from the
petroleum activities will be earmarked to finance educational
activities and communitarian programs along the peninsula area such
as the construction of schools, among other activities.
Ecuador to get 6 megawatt hydroelectric plant
Espol also envisions the construction of a natural gas storage center
in Santa Elena. The school has already joined up with Nobis Group,
which is administered by Isabel Noboa.
ECUADOR. Chimborazo’s Production Chamber Corporation,
with foreign contributions, is managing the construction of a 6
megawatt hydroelectric plant. The project consists of installing, in 18
months, a plant that supplies of electric energy to 10,000 industries,
micro-industries, crafts-men and retailers of the province.
Under the plan, Espol is looking for financial support for the project
from Nobis, although it has yet to be approved by the Ecuadorian
Energy Ministry and PetroEcuador. – LatinPetroleum.com LP
38
Occidental Reclasses Ecuador as Discontinued Operations
ECUADOR. The recent seizure of Occidental Petroleum’s Block 15
investment in Ecuador will result in Occidental recording in the
second quarter of 2006 a net year-to-date after-tax charge of $306
million, ($0.71 per share) in discontinued operations. This charge will
cause first quarter 2006 diluted earnings per share from continuing
operations to change to $2.67 per share from the previous disclosure
of $2.83 per share.
Occidental expects second quarter 2006 diluted earnings per share
from continuing operations to be between $2.70 and $2.80 per share.
On May 15, 2006, Ecuador’s Minister of Energy terminated
Occidental’s contract for the operation of Block 15, which comprises
all its oil producing operations in the nation, and the Government of
Ecuador seized Occidental's Block 15 assets shortly thereafter. The
process resulting in this action began more than 2-years ago shortly
after Occidental prevailed, by unanimous decision of an international
arbitration panel, in a legal dispute over tax refunds that the
Government of Ecuador wrongfully withheld from Occidental. The
panel’s decision was subsequently upheld by a London court.
As a result of the seizure, Occidental has classified its Block 15
operations as discontinued operations. In the second quarter of 2006,
Occidental will record a net year-to-date after-tax charge of $306
million, ($0.71 per share) in discontinued operations. This
discontinued operations amount comprises after-tax charges for the
write-off of the investment in Ecuador, as well as ship or pay
obligations entered into with OCP Pipeline to ship oil produced at
Block 15, partially offset by $109 million net of tax income from
operations in the first five months of 2006.
Following is a reconciliation of the first quarter 2006 net income,
diluted earnings per share and worldwide daily net production after
retrospective application.
Reconciliation in US Millions
Income
from
continuing
operations
Discontinued
operations, net
Net income
Previous
Disclosure
Ecuador
Reclass
Retrospective
Application
$1,216
($65)
$ 1,151
$13
$65
$78
$1,229
$0
$1,229
Diluted Earnings per Share
Income
from
continuing
operations
Discontinued
operations, net
Net income per
share
$2.83
($0.16)
$2.67
$0.03
$0.16
$0.19
$2.86
$0.00
$2.86
Net production
per day (MBOE)
636
(44)
592
Occidental will report its Block 15 results for current and prior
periods as discontinued operations in its statements of income and
cash flows in accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. Balance sheet amounts will be reclassified to
assets of discontinued operations and liabilities of discontinued
operations. Oil & Gas disclosures will be adjusted to exclude the
Ecuadorian operations.
Additionally, on May 17, 2006, Occidental filed an arbitration claim
against the Government of Ecuador, seeking redress for illegal
confiscation of Occidental’s Block 15 operations in Ecuador. The
company filed its claim with the International Centre for
Settlement of Investment Disputes in Washington DC, invoking the
protections of the US-Ecuador Bilateral Investment Treaty.
Occidental requested that the arbitration panel order interim relief by
restoring its rights in Ecuador and preventing Ecuador from replacing
Occidental with another third party operator in Block 15 until its
claims can be decided, a process that could take well over a year. –
EnCana: Ecuador indemnity with Andes Petroleum Company
ECUADOR. At December 31, 2004, EnCana decided to divest of its
Ecuador operations and such operations have been accounted for as
discontinued operations. EnCana’s Ecuador operations include the
100% working interest in the Tarapoa Block, majority operating
interest in Blocks 14, 17 and Shiripuno, the non-operated economic
interest in relation to Block 15 and the 36.3% indirect equity
investment in Oleoducto de Crudos Pesados (OCP) Ltd. (OCP),
which is the owner of a crude oil pipeline in Ecuador that ships crude
oil from the producing areas of Ecuador to an export marine terminal.
The company is a shipper on the OCP Pipeline and pays commercial
rates for tariffs. The majority of the company’s crude oil produced in
Ecuador is sold to a single marketing company. Payments are secured
by letters of credit from a major financial institution which has a high
quality investment grade credit rating.
In accordance with Canadian generally accepted accounting
principles, depletion, depreciation and amortization expense has not
been recorded in the Consolidated Statement of Earnings for
discontinued operations.
On February 28, 2006, EnCana completed the sale of its interests in
Ecuador operations for $1.4 billion and recorded a loss on sale of $47
million. During the second quarter, the Government of Ecuador
seized the Block 15 assets, in relation to which EnCana previously
held a 40% economic interest, from the operator. This is an event
requiring indemnification under the terms of EnCana’s sale
agreement with Andes Petroleum Company.
The purchaser requested payment and EnCana has accrued the
maximum amount, calculated in accordance with the terms of the
agreement, of approximately $265 million, which results in a $232
million net loss being recorded against net earnings in the second
quarter of 2006.
At this point EnCana does not expect that any further significant
indemnification payments relating to any other business matters
addressed in the share sale agreement will be required to be made to
the purchaser. – LatinPetroleum.com LP
Chevron gets a court win in San Francisco
ECUADOR. USA federal judge in San Francisco granted in part and
denied in part a motion by Chevron Corporation to dismiss a class
action claim related to environmental harm in the Ecuadorian
rainforest.
39
In an order filed on July 21 following a July 20 hearing, US District
Judge William Alsup found that the plaintiffs failed to state any
claims on which relief could be granted.
Perupetro S.A. on the details of an exploration license covering
Block Z-34, offshore Peru.
The invitation follows Perupetro’s formal designation of Gold as an
approved offshore operator and Plectrum as an approved contractor.
Plectrum expects that Perupetro will sign and approve the contract
within weeks, followed by the eventual formal approval of Peru’s
minister of energy and mines.
On June 8, Plectrum announced that it had agreed to form a joint
venture with Gold in respect to Block Z-34. Under the joint venture,
Gold’s existing promotion agreement would be converted into a 30year exploration and exploitation license. Final completion of the
transaction was subject to the qualification of both companies as
approved contractors and the negotiation and approval of the
exploration license terms by the Peruvian authorities.
“This is excellent news for Plectrum in our new joint venture with
Gold,” said Mike Evans, Plectrum’s chief operating officer. “I look
forward to speedy negotiation of the contract terms so that we can
become operationally active as soon as possible.” –
Repsol-YPF acquires Mobil stations in Peru
He left the door open for the plaintiffs to amend the claim, however,
although he noted in his order that surmounting the barriers to stating
a valid claim are “seemingly impossible.” The plaintiffs had until
August 5, 2006 to amend and refile their complaint.
The suit was initially filed in May in U.S. District Court for the
Northern District of California. A group of nine (9) plaintiffs, all
residents of the Ecuadorian rainforest region, sued Chevron, alleging
unjust enrichment and violations of California’s Unfair Competition
Law.
Between 1971 and 1992, Chevron subsidiary Texaco extracted
billions of gallons of oil from beneath the rainforest. Contrary to the
standard industry practice of reinjecting contaminated wastewater
from the drilling back into the well, the company dumped the sullied
water in open pits. Four (4) of the plaintiffs have cancer, and the
other five (5) have family members who contracted cancer, according
to the complaint.
Chevron is in a separate legal battle in Ecuador over Texaco’s
practices and a cleanup that class action plaintiffs in Ecuador say was
insufficient. The San Ramon-based company is also litigating in New
York with the Republic of Ecuador and its state oil company
PetroEcuador in a related action.
In its motion to dismiss the case, Chevron had asked the San
Francisco court to stay the West Coast proceedings until the two
other cases were resolved. The motion for a stay was denied. –
Plectrum, Gold Oil Invited to Enter Negotiations for Offshore
Peru Block
PERU. Plectrum Petroleum Plc, along with joint venture partner
Gold Oil Plc, have been invited to start exclusive negotiations with
PERU. Repsol-YPF, via its representative company in Peru,
Commercial Repsol SAC (Recosac), acquired a network of service
stations owned by Mobil for $27.5 million. The acquisition is part of
Repsol-YPF’s goal to increase the number of distribution stations in
Peru under its name to 220.
Recosac is responsible for the administration of wholesale businesses
and service stations in Peru.
With this acquisition, Repsol-YPF is now has operations in the
upstream, downstream and midstream sectors in Peru. Prior to the
sale of the service stations to Repsol-YPF, Peru’s state oil company,
Petroperú, reportedly sold approximately 16.3 thousand barrels per
day of fuels to Mobil. – LatinPetroleum.com LP
Pluspetrol prepares to drill initial well at Lot 56
PERU. Pluspetrol, the operating company of the Camisea
Consortium in Peru, initiated drilling work on the first of six (6) wells
located at the Pagoreni deposit, pertaining to Lot 56 which is adjacent
to Lot 88 of Camisea.
Based on studies to date, the Pagoreni deposit could contain
estimated production of 100-120 million cubic feet per day of natural
gas.
According to an agreement signed between the Peruvian government
and Pluspetrol in 2004, the company is committed to drill the first
well at Pagoreni by September 2006 or acquire 200 kilometers of 3-D
seismic data.
“With the drilling of this well and the realization of 363 square
kilometers of 3-D seismic data, not only will we fulfill our
commitment, but ahead of time,” according to Norberto Benito,
general manager of Pluspetrol.
Benito also announced that the next phase of the contract calls for
investments of $700 million. – LatinPetroleum.com LP
40
IFT establishes distribution relationship for Western South
America
program should lead to a drilling program commencing late 2006 or
early 2007. No rig contracts have yet been signed for this activity.
PERU. International Fuel Technology, Inc. signed a distribution
agreement with Lima, Peru-based Colcom SAC to introduce its
DiesoLIFT(TM) technology to industrial customers in Peru, Ecuador
and Chile.
In northern Argentina, line clearing has started in preparation for a
315 square kilometer 3-D seismic program due to commence
immediately following the seismic acquisition at Medianera. This
northern seismic program will be acquired on the Puesto Guardian
(Antrim 40% interest) and the Capricorn (Antrim 50% interest)
licenses in preparation for a 2007 drilling program. –
Colcom is a privately owned distribution company supplying fuels
and lubricants to hundreds of companies in the region’s trucking, rail,
marine, mining and stationary power generation industries.
“The relatively high cost and often poor quality of fuel available in
Peru and the region means the savings and environmental
improvement available from IFT's DiesoLIFT(TM) will be a
tremendous value to diesel fuel end users,” said Jose Antonio
Fernandez, Colcom’s CEO.
“This initial DiesoLIFT(TM) that we have purchased will introduce
the product to large-volume industrial and commercial customers as a
valuable efficiency improvement and emissions reduction method,”
he said.
“This non-exclusive agreement with Colcom fits with our strategy of
leveraging established distribution organizations in regions and
sectors where IFT’s technology provides readily apparent cost
savings and environmental improvement,” said Jonathan R. Burst,
IFT’s CEO. “We expect the work Colcom will soon begin with
regional industry leaders will demonstrate the important role this new
energy technology can play in areas where liquid hydrocarbons
account for a large proportion of total energy consumption.”
International Fuel Technology is a fuel performance enhancement
company focused on providing its technology to large, industrial
consumers of liquid hydrocarbon-based fuels. – LatinPetroleum.com
LP
OTHER SOUTHERN CONE
Antrim moving ahead with Tierra del Fuego plan
ARGENTINA. Antrim Energy announced that to date it has
completed 6 liquid-rich gas wells, 3 wells testing 15-20 million cubic
feet per day (MMcf/d) of natural gas and 3 wells testing 1-3 MMcf/d.
Antrium added each well also testing 40-50 barrels of associated
condensate and natural gas liquids per MMcf of gas tested; one (1) oil
well, which is currently on production and flowing without artificial
lift at a rate of 340 barrels per day (b/d); 4 wells are waiting on
completion and/or stimulation; and, one (1) well is dry and
abandoned.
Antrim and partners are currently negotiating to extend the drilling
contract with the Petroservicios rig to December 2006. The drilling
equipment was originally scheduled to leave the area in August 2006.
The rig is currently moving to a location in the Las Violetas area to
offset and appraise the recent new field oil discovery LV 105 as
reported on June 5, 2006.
Antrim and its partners are pursuing new production facilities and
contracts for the sale of the latest gas and liquid discoveries. Recent
construction of new facilities and a pipeline on the Las Violetas
license will allow the transport and sale of an additional 10 MMcf/d
starting in July 2006.
In central Argentina, on the Medianera concession (Antrim 70%
interest), the company anticipates starting a 74 square kilometer 3-D
seismic program in late-July 2006. The results gained from this
High energy prices to affect commerce in the South Cone
ARGENTINA. Argentine merchants and some gas station owners
living in cities which border Chile have expressed their reservations
about a measure to increase NAFTA gas prices for foreigners. They
say that commerce will be adversely affected. The measure was
announced by Argentine President Nestor Kirchner.
Angel Domingo Zanni, President of the Chamber of Commerce of
Rio Turbo, an Argentine town deep in the Patagonia that borders
Puerto Natales , told El Mercurio on Sunday that the measure will not
help in any way with the integration of the Patagonia. He said that his
small town of 8,000 persons largely depends on Chilean tourists.
Liliana Garcia, a YPF vendor in Rio Turbo, told El Mercurio that,
‘Without doubt, the announced measure will significantly decrease
the flow of Chilean vehicles into our city.’
She also added that nobody knows who will assume the costs of the
new gasoline dispensing machines, just for foreigners.
Further north, merchants and gas station owners in Mendoza, an
Argentine ski resort and its wine capital, appeared on Chilean
television, criticizing the proposed measure. Mendoza is 180 miles
from Chile’s capital, Santiago, and annually receives 350,000
Chileans.
Chilean government officials have also panned the measure.
According to La Nacion, Foreign Minister Alejandro Foxley
criticized Argentina for maintaining a “double discourse,” on one
hand calling for more Latin American integration but on the other
increasing gas prices for its’ neighbors.
Argentine Planning Minister Julio De Vida, denied these charges,
saying that, “we take decisions that the nation needs.”
Chile and Argentina share a border of approximately 2,400 miles. –
Vinod Sreeharsha, LatinPetroleum.com LP
Construction of Eva Perón ship for PDVSA to begin in Argentina
ARGENTINA. The construction of the first ships ordered by
Venezuela’s PDVSA from the Río Santiago Shipyard in Argentina
commenced on July 26, 2006.
The first ship will be named Eva Perón, according to agreements
signed by Venezuelan and Argentine officials nearly a year ago.
The July 26th date coincides with the commemorated of the
anniversary of the death of Eva Perón.
Under the agreement, the Río Santiago Shipyard will construct two
(2) ships in the initial stage at an estimated cost of $56 million each.
Both nations agreed the contract could be extended to include the
41
construction of two (2) additional ships. The estimated cost of the
four (4) ships is around $200 million.
Argentine officials announced the construction of the first two ships
is estimated to create 1,500 new jobs. – LatinPetroleum.com LP
Uruguay and Argentina sign agreement with Venezuela to
explore the Faja
ARGENTINA. The state oil companies of Argentina, Uruguay and
Venezuela, signed an agreement to initiate the exploration of the
Ayacucho field (Block 6) in Venezuela’s Orinoco heavy oil belt or
Faja, according to Argentina’s Planning Minister, Julio De Vido.
Under the agreement, Argentina’s ENARSA, and Uruguay’s
ANCAP will team up with Venezuela’s PDVSA to explore the
Ayacucho block which has estimated oil in place of 87 billion barrels,
according to PDVSA estimates. – LatinPetroleum.com LP
Bachelet insists she will not lower combustible tax
CHILE. Among protest about the rising prices of benzene, Chilean
President Michelle Bachelet insisted that the government would not
lower the tax specific to fuels.
In the case of gasoline, this tax is 6 UTM per cubic meter or
equivalent to approximately $190 pesos per liter. Whereas, for diesel
engines it is 1.5 UTM per cubic meter or equivalent to approximately
$47 pesos per liter.
“What isn’t possible is to request that we spend more but with less
resources. I want to make a call to the prudence and responsibility.
This is a serious discussion, we do not want to undress saints to
clothe others, that is not a grace,” according to Bachelet. “We must
be improving all the things that we do, we want to maintain a policy
of increasing social cost, more and more, but that is sustainable in
time and for that reason we can’t lower taxes, but we can be efficient
and to take focused measures on those who most need it such as the
poor and middle class.”
Bachelet added, “We cannot arrive and just take measures as popular
as they may be, we do not think that with the pretext of helping the
motorists that the richer people benefit.”
In that sense, Bachelet reiterated that the government has taken two
measures to confront the rise in prices.
First is the submission of an $18,000 peso bond that will commence
payment from July 2006 and that will benefit more than 1,200,000
families, including those who belong to the Solidario Chile social
protection system, beneficiaries of the family subsidy and workers
who receive family allocations for monthly incomes equal or inferior
to $180,000 pesos.
The words of the female leader of Chile, who was accompanied
during her speech by the ministers of Mideplan, Clarisa Hardy, and
of Treasury, Andrés Velasco.
Parliamentarians of all the sectors, representatives of transport
sectors, truck drivers and even motorists pleaded for reductions in
diesel and benzene prices. In fact, recently a group of drivers heeded
the call and carried out horn-blowing in the streets of the capital. –
March Resources Receives Independent Report on Chilean
Project
CHILE. March Resources previously announced the award from the
Ministry of Mining and Energy of Chile approval to have exclusive
oil and gas exploration and development rights to two blocks in
Northern Chile in the Tamarugal Basin.
The Pica North and Pica South blocks in this basin consist of a total
of 10,000 square kilometers (2,500,000 acres). The definitive Special
Operations Contracts (SPOC) for each of these areas are currently
being negotiated.
The SPOC outlines the exploration and development rights on the
blocks, which are valid for a period of 35-years and will detail the
work commitments that are required for each of the two blocks.
March has received an independent assessment of the potential
resource on the Pica North Block Gas Accumulation. The Pica North
Block will have the initial exploratory wells.
Resource And Prospect Report
A report was prepared by DeGolyer and MacNaughton Canada
Limited (D&M), effective June 30, 2006, estimating the prospective
resources of first proposed drilling location in the 100% owned Pica
North Block. The report estimated gross gas resources on the initial
prospect on the North block generating a range of estimated-unrisked
gross prospective gas resources from 86 billion cubic feet (Bcf) to 1.5
trillion cubic feet (Tcf), with the best estimate of 655 Bcf of
recoverable gas.
The report further estimated a geologic risk adjusted gross
prospective gas resource of 94 Bcf of gas for the initial well alone.
The D&M Pica North report has been prepared in accordance with
National Instrument 51-101 as it pertains to the evaluation of
prospects and resource. The company filed the D&M Pica North
report on SEDAR and encourages readers to review the report in its
entirety for additional information. The report is subject to a number
of qualifications and assumptions, and discloses no reserves of any
nature.
The report estimates that the gas resource on the primary structure, on
the North Pica Block, as presently mapped with the current
geophysical control, is approximately 16 miles long and 4 miles
wide, with a vertical closure of 2,500 feet.
The second measure refers to a law that in Congress that reactivates
the Stabilization of Combustible Prices Fund. Bachelet, who spoke
after publicizing in the Maipú commune the bond that mitigates the
rise of the fuel prices, argued that the money collected by the specific
tax serves to pave rural and secondary roads and settle social
expenses, among others.
Two objective sandstone horizons, one at an estimated depth of 4,300
feet and one at an estimated top of 7,000 feet, are anticipated as a
result of detailed surface stratigraphic studies. Porosities in the range
of 12-19% and permeabilities up to 5 MD have been measured in the
surface outcrops.
“A reduction of the gasoline tax would mean for example not
receiving $500 million that is being used for social expenditures and
the construction and paving of rural of secondary roads that cannot be
awarded, which is to say, this money is being spent,” she indicated.
As a result of high-angle reverse faulting, a repeat of the deeper
sandstone could be encountered at an estimated depth of 8,470 feet.
Additional sandstone reservoirs are anticipated to a depth of 12,800
feet. All of the Jurassic black marine shales, which are at this locality,
42
are in excess of a measured 16,000 feet, and estimated to have been
in the hydrocarbon generating window since the end of Jurassic time.
Corporation that allows ParaFin to acquire an 80% interest in a
license to explore the 2,456,453 hectares (approximately 6,069,994
acres) in the Alto Parana Block, Alto Parana Province of Paraguay.
Exploration Project
March has begun the field work necessary to comply with all
environmental regulations of the Chilean government in order to be
ready to begin the drilling program in the fourth quarter of 2006.
March has contracted Sustentable SA, who is situated in Santiago,
Chile, to provide the Environmental Impact Declaration of the Pica
North Gas and Oil Prospecting Project which is required prior to the
commencement of the drilling project.
March has contracted New Tech Engineering to assist in all
engineering and logistical matters associated with the drilling of the
first three exploratory wells. New Tech Engineering is based in the
United States but has provided engineering and project management
services for large-scale exploration projects world-wide. –
FOGL to Conduct Survey in Falkland Basins
FALKLANDS. Falkland Oil and Gas Limited (FOGL) signed a
letter of intent with Offshore Hydrocarbon Mapping plc (OHM) to
undertake a Controlled Source Electro-Magnetic survey (CSEM)
over the company’s licenses in the South and East Falkland basins.
The use of CSEM technology in this environment is particularly
appropriate and exciting. CSEM is a method that investigates the
electromagnetic properties of rocks and has a recognizable response
when oil and gas is present. CSEM is an extremely cost-effective
method of high grading an extensive inventory of exploration
prospects and leads. CSEM imaging works best under certain
conditions, including deepwater (>500 meters), simple sand and shale
geological sequences, and large traps (prospects) -- all of which are
prevalent within FOGL’s South and East Falkland basins.
This program has the potential to indicate which of FOGL’s
numerous prospects may contain hydrocarbons. The company’s
strategy will be to obtain CSEM data over many of the larger
prospects. Based on the results, infill 2D seismic will then be
acquired in order to determine the best sites for exploration wells.
This is the first part of FOGL’s revised forward exploration program
recently discussed with the Falkland Island Government. FOGL had
already begun preparatory work that will enable rapid
implementation of a CSEM survey, further demonstrating FOGL’s
commitment to this exploration acreage.
FOGL expects to commence both the CSEM and 2D seismic surveys
before the end of 2006 and be in a position to announce the results
early next year.
“We are very excited by this new technology and its application in
our licenses,” said Tim Bushell, FOGL’s CEO. “The use of CSEM
imaging is an appropriate exploration tool given the large number of
prospects and leads that we have identified. We believe that CSEM
can help to significantly reduce risk, improve the chance of success
and allow us to focus on the best prospects for drilling in 2008.” –
ParaFin Corporation is negotiating with several groups to secure
funding for the Alto Parana Farmout Agreement with Guarani
PARAGUAY. ParaFin Corporation previously signed a Farmout
Agreement with Guarani Exploration and Development
The terms of this Agreement for the concession are subject to the
approval of 1) The Paraguay Minister of Public Works and
Communications. This was approved by the Executive Decree No.
11902. A letter sent to Guarani by Hector Ruiz Diaz, Vice Minister of
Mines and Energy, stated that Guarani had complied with steps
required for concession assignment under Hydrocarbon Law 779/95
and that Congress had been sent the information required for passing
a law regarding the concession agreement; 2) The President of
Paraguay, which has signed the Concession Agreement; and 3) The
Paraguayan Congress for the issuance of the Hydrocarbon
Exploration License. Guarani has informed ParaFin that the only
remaining step is the approval by the Congress of Paraguay and that
the Alto Parana Concession should be on the Agenda during the
current session.
ParaFin Asset Manager Frank Sáez has begun negotiations with
several groups to secure up to $100 million to fund the Paraguayan
Hydrocarbon Concession exploration and development program. The
negotiations consist of (a) Debt and Equity participation of the
Paraguayan Hydrocarbon Project (b) Investment and Financing in
ParaFin's infrastructure requirements domestic and abroad (c)
investment and financing of target acquisitions (d) factoring of
orders. In light of the underlying stability of the Paraguayan political
situation (see below), Guarani anticipates approval of the
Hydrocarbon Concession permits upon securing the financing of the
operations.
Paraguay has been named by the International Monetary Exchange
(IMF) as the first nation in South America to have met the entire
requirement of a stable political and economic nation. In fact, the US
State Department announcement of May 9, 2006 announced that
Paraguay has signed the “US Foreign Aid Program” with the US
Agency for International Development (USAID) to further expand
their economic stability.
At the signing ceremony in Asuncion with The Millennium
Challenge Corporation (MCC), a US federal entity that administers
the Bush administration’s Millennium Challenge Account (MCA)
foreign aid compacts, Kenneth Hackett, board member, congratulated
Paraguay for being the first nation in Latin America to be awarded a
Threshold Program.
He also praised Paraguay’s president Nicanor Duarte Frutos for his
willingness to confront a sensitive problem that often is ingrained
deeply in developing nations, and he stressed that corrupt practices
are incompatible with democratic governance. The June 6, 2006
announcement confirms Paraguay as the recipient of a $97 million
guarantee
to further their economic development. –
Uruguay and Brazil study possible expansion of refinery
URUGUAY. Brasil and Uruguay are studying the possibility of
modernizing and expanding the capacity of the La Teja refinery
located in Uruguay. The refinery would produce diesel for the
Uruguayan market and also for export to the Argentine market,
according to officials from both nations.
The La Teja refinery, located outside of the capital city of
Montevideo, currently has the capacity to process 50,000 barrels per
day (b/d) of petroleum. However, Uruguayan officials announced
they expect to increase the processing capacity to 60,000 b/d or
43
70,000 b/d with the assistance of Brazilian state oil company,
Petrobras.
The refinery would process heavy oil from the Marlin field located in
the Campos Basin offshore Brazil. – LatinPetroleum.com LP
VENEZUELA
4Sight Technologies Expands Into Latin America
BARCELONA. 4Sight Technologies, a global leader in operations
scheduling and project management software, announced on July 18,
2006 that it has opened its Latin American division in Barcelona,
Venezuela.
A provider of the most sophisticated software solutions for the
aerospace, telecommunications and oil, gas and mining industries,
4Sight Technologies’ Latin American division will provide
engineering and project management consulting to regional natural
energy firms. The new Latin American division is located in
Barcelona, about 150 miles east of Caracas on Venezuela’s
northeastern coast.
Founded in 1997, 4Sight Technologies’ president Hernan Clarke said
the move to open a Latin American division was encouraged by the
recent boom in the natural energy industry and the demand for
advanced IT solutions, specifically in the petroleum sector. Clarke
selected Venezuela because it is not only the fourth top producer of
US oil, but it is also his native country.
“The natural energy industry has grown substantially over the last
decade, creating a significant demand to maximize efficiency and
productivity within these vital industries,” said Clarke. “By opening a
Latin American division within one of the largest oil, gas and mining
regions, 4Sight will be able to provide its unmatched technology,
products and expertise to those companies in need.”
4Sight Technologies’ global headquarters is in Scottsdale, Ariz., US,
with a European division in Madrid, Spain. – LatinPetroleum.com LP
Medoro Resources closes acquisition of Venezuelan properties
BOLIVAR. Medoro Resources Ltd. announced it has completed the
acquisition of all of the shares of Panwest Seas Corporation Ltd.,
which holds the rights to the Lo Increible 4A & 4B gold exploration
properties located in the El Callao area of the State of Bolivar,
Venezuela.
As previously announced, in consideration for the acquisition of
Panwest, Medoro issued 15,140,000 common shares to the
shareholders of Panwest, paid $1,000,000 in cash and also agreed to
pay to the sellers a royalty of $15 per ounce of gold on all production
from the Lo Increible 4A & 4B mining properties. Medoro has also
assumed all of Panwest’s current liabilities and the expenses of the
acquisition of the purchased shares and the closing of the
transactions, totaling less than $200,000.
The company is planning to commence a 15,000 meter diamond
drilling program at the La Cruz, La Sofia and El Tapon prospects by
the end of July, 2006.
Risk factors:
The company’s exploration and development activities primarily
occur in Venezuela and, as such, the company may be affected by
political or economic instability in Venezuela. The risks include, but
are not limited to, civil unrest, terrorism, military repression, extreme
fluctuations in currency exchange rates and high rates of inflation.
The security situation in Venezuela over the past few years has been
highly volatile due to political conflict between the Venezuelan
government and opposition groups.
In 2004, a national referendum ratified the mandate of the President
of Venezuela and later that year, elections of governors and mayors
throughout the nation resulted in the ruling group of parties
controlling most of such offices. These events have resulted in
greater political stability, which is expected to last for some time.
Also, oil revenues have remained high, which has allowed the
government to increase public spending. Violent crime is prevalent
throughout the nation. Kidnapping, smuggling and drug trafficking
occur frequently in remote areas, including Bolivar state.
Changes in resource development or investment policies or shifts in
political attitude in Venezuela may adversely affect the company’s
business. Operations may be affected in varying degrees by
government regulations with respect to restrictions on production,
price controls, export controls, income taxes, expropriation of
property, maintenance of claims, environmental legislation, land use,
small miners’ activities, land claims of local people, water use and
mine safety. The effect of these factors cannot be accurately
predicted.
In the past, Venezuela has imposed exchange controls that make it
difficult for foreign mining companies to repatriate profits. All
foreign currency derived from the export of products from
Venezuela, including gold, must be sold to Venezuela’s Central
Bank (BCV by its Spanish abbreviation) at the fixed exchange rate at
the time of the transaction. Foreign investors have the right to apply
to the Central Bank for foreign currency at the fixed exchange rate
for the purposes of repatriation of capital, dividends and interest.
The provisions of the Investment Protection Treaty with Canada,
which was ratified by Venezuela on January 20, 1998, should provide
certain protections to Canadian-based investors (like the company) in
Venezuela. – LatinPetroleum.com LP
Telefónica Móviles To Deploy Plug Power Fuel Cells In
Venezuela
CARACAS. Plug Power Inc., a leader in providing clean, reliable
on-site energy products, announced that Telefónica Móviles, one of
the two largest wireless providers in Latin America, will begin
deploying Plug Power’s GenCore® backup power systems in
Venezuela.
The initial deployment includes nine backup fuel cell systems that
were purchased through Plug Power’s Venezuelan distributor Corpo
Teletecnical. The systems will be placed at tower locations with
critical backup needs in the greater Caracas area.
This new deployment follows the completion of a successful eightmonth trial at an active Telefónica Móviles wireless location outside
of Caracas. The GenCore system responded effectively to several
grid outages during the trial period, including one that lasted
approximately 12 hours, providing power and maintaining tower
operation when the AC grid failed due to overloading and weatherrelated factors.
Telefónica Móviles has approximately 700 towers in Venezuela and
more than 10,000 sites across Central and South America.
44
Richard Croce, Energy Manager of Telefónica Móviles in Venezuela
identifies candidate sites for GenCore use as those where there is
insufficient space for additional batteries or a generator, or where
generators are prohibited due to noise or pollution issues or weight
restrictions. Additional opportunities are expected to emerge as
Telefónica Móviles continues to identify sites where traditional
backup infrastructure frequently fails due to extreme weather
conditions and an unstable electric grid.
“Telefónica is clearly the leader in network reliability while reducing
our environmental impact across the network. We chose Plug
Power’s fuel cell backup power technology over additional
investment in batteries and generators due to GenCore’s robust
reliability and clean, quiet operation. We believe GenCore clearly
represents the next step in evolution of network reliability, and we
look forward to further deployment of GenCore systems in the
Venezuelan network,” according to Croce.
“We are glad to count Telefónica, a global leader in
telecommunications, as a Plug Power customer,” said Mark Sperry,
Plug Power’s Chief Marketing Officer. “Plug Power is equipping
telecommunications service providers with the technology to improve
the reliability of their networks and their customers’ experience,
while reducing customer churn and revenue losses due to failure of
traditional backup energy infrastructure.”
Plug Power is also participating in GenCore trials with Telefónica
Móviles in other key markets including Mexico, Brazil and Spain.
Product trials in Mexico and Brazil are being conducted with Plug
Power’s distribution partner Tyco Electronics Power Systems. –
Chevron Corporation and CVP sign JV contract for Boscán field
CARACAS. Chevron Corporation and the Venezuelan Petroleum
Corporation (CVP by its Spanish abbreviation), signed the contract
to convert the former’s operating agreement for the Boscán field into
to the JV or mixed company, Petroboscán.
The Boscán giant oil field is located in Venezuela’s Zulia state and is
estimated to have more than 1 billion barrels of remaining
recoverable reserves. The field was ChevronTexaco’s first major
discovery in Venezuela in the mid-1940s. Chevron once again
became operator of the field in July 1996 under a service agreement
with PDVSA.
As an operator of the field with no equity interest, ChevronTexaco
increased output by more than 30% from 78,000 b/d to 115,000 b/d.
Chevron Corporation Latin America President, Ali Moshiri,
emphasized that his company’s strategy in Venezuela is aligned with
the energy policy of the Venezuelan Government and the Ministry of
Energy and Petroleum (MEP). – LatinPetroleum.com LP
Chevron Corporation and CVP sign JV contract for LL-652 field
CARACAS. Chevron Corporation and the Venezuelan Petroleum
Corporation (CVP by its Spanish abbreviation), signed the contract
to convert the former’s operating agreement for the LL-652 field into
to the JV or mixed company Petroindependiente.
Production from the LL-652 field is averaging about 8,000 b/d of 3040 degree API crude oil.
Partners in Petroindependiente include CVP (74.8% WI) and
Chevron Corporation (25.2% WI).
In 1997, ChevronTexaco, along with its consortium partners, was
awarded a 20-year contract to operate and increase crude oil
production on behalf of PDVSA in the northeastern section of Lake
Maracaibo. Production increase from 8,400 b/d in 1998 to as high as
15,500 b/d. – LatinPetroleum.com LP
Shell Venezuela and CVP sign new JV contract for Urdaneta
West field
CARACAS. Shell Venezuela, S.A. and the Venezuelan Petroleum
Corporation (CVP by its Spanish abbreviation) signed the contract
that in effect converts the old operating agreement into a new joint
venture named Petroregional del Lago.
The new JV company will operate the Urdaneta West field, formerly
operated by Shell, located in Venezuela’s Zulia state.
With the signing of the contract, the conversion process to the new
JV has been completed.
This marks the third contract signed by CVP and private partners
who agreed to participate in the creation of the new JVs or companias
mixtas (mixed companies).
France’s Perenco and Argentina’s Tecpetrol also signed their
contracts to finalize the conversion of the companies Petrowarao
and Baripetrol, respectively.
The Boscán field is producing on average 115,000 barrels per day
(b/d) of 10.5 degree API crude oil.
Partners in Petroboscán include CVP (60% WI), Chevron
Corporation (39.2% WI) and the Venezuelan company, Ineboscan
(0.8% WI).
Shell Venezuela President Sean Rooney announced the signing marks
the beginning of a new era with PDVSA. Rooney reiterated that Shell
has been in Venezuela for 90 years and all intentions are to continue
for another 90 years more.
For his part, Eulogio del Pino, the president of CVP, added that the
signing confirms that Venezuela continues to be a safe and
transparent nation for making investments.
45
Partners in Petroregional del Lago include CVP (60% WI) and Shell
Venezuela (40% WI).
The Urdaneta West field, located in the western state of Zulia (Lake
Maracaibo), is currently producing on average about 45,000 barrels
per day of 28 degree API crude oil. – LatinPetroleum.com LP
Baripetrol and Petrowarao complete conversion process
CARACAS. The Venezuelan Petroleum Corporation (CVP by its
Spanish abbreviation), signed contracts for the successful conversion
of Baripetrol and Petrowarao from operating contracts to joint
venture companies. Partner in the new JVs include Perenco, Lundin
Latina and Tecpetrol.
CITGO announces realignment of retail gasoline network
CARACAS. CITGO Petroleum Corporation announced the
decision of its board of directors to realign the company’s national
retail gasoline network footprint. This action will result in a stronger
company presence in the East and Gulf Coast regions, and a
transitioning from parts of the Midwest, Kentucky, Oklahoma and
northern Texas by the end of March 2007, according to company
officials.
Eulogio Del Pino, the president of CVP and an internal director of
PDVSA, informed that the constitution of these new JVs reflects the
successful migration process from the old operating agreements to
the new mixed company model whereby the Venezuelan government
will have a minimum 60% interest.
“We are taking this action to best position the company for a strong
future.” said Félix Rodríguez, CITGO president and CEO. “CITGO’s
current branded sales exceed our in-house production capabilities,
straining our resources and potentially compromising our ability to
provide optimum service to our customers. We will be focusing on
strengthening our presence in marketing areas in the Northeast,
South, mid-Atlantic and portions of the Midwest that are served by
our refineries in Lake Charles, Louisiana, Corpus Christi, Texas, and
Lemont, Illinois, while reducing the current number of branded
locations in markets in which we are less efficient.”
Baripetrol will operate the Colón field in Zulia state, which produces
13,600 barrels a day (b/d). Partners in Baripetrol include PDVSA
(60% WI), Argentina’s Tecpetrol (17.5% WI), Sweden’s Lundin (5%
WI) and France’s Perenco (17.5% WI).
In order to offset the roughly 130,000 barrel-per-day shortfall
required to meet customer obligations, CITGO purchases gasoline
from other refining companies on the open market, a move that
places the company at a competitive disadvantage.
Petrowarao will operate the Pedernales field which produces 4,900
b/d and the Ambrosio field in Zulia state which produces 2,000 b/d,
both in the Orinoco Delta. Partners in Petrowarao include PDVSA
(60% WI) and Perenco (40% WI). – LatinPetroleum.com LP
At the end of this realignment, the number of CITGO branded
locations will be reduced by approximately 14% with little impact on
the more than 10 million customers who visit the locations each day.
Spread Between WTI and Venezuela Crude Narrows
CITGO markets gasoline via agreements with independent marketers
and does not own or operate any of its locations, including those in
the affected areas.
CARACAS. The Venezuelan basket of crude oils for the 2Q:06
traded at a $3.78/bbl discount to the OPEC basket, a $9.79/bbl
discount to West Texas Intermediate (WTI), and a $9.50/bbl discount
to Brent. – LatinPetroleum.com LP
Venezuela Oil Price Summary ($/bbl)
Venezuela
OPEC
WTI
Brent
2003
2004
2005
2006E *
2007E *
$25.76
$33.13
$45.39
$58.21
$63.37
$28.10
$36.04
$50.66
$62.39
-
$31.12
$41.42
$56.58
$68.26
$73.56
$28.84
$38.24
$55.07
$67.80
-
Jan.06
Feb.06
Mar.06
1Q:06
$53.72
$52.15
$53.74
$53.20
$58.14
$56.84
$57.64
$57.54
$65.13
$62.23
$62.82
$63.39
$63.52
$61.42
$62.90
$62.61
Apr.06
May.06
Jun.06
2Q:06
$60.29
$61.34
$60.89
$60.84
$64.20
$65.16
$64.50
$64.62
$69.96
$71.04
$70.87
$70.63
$70.26
$71.04
$69.68
$70.34
Jul.06*
Aug.06*
$64.09
$64.68
$68.50
$70.17
$74.45
$75.15
$74.20
$76.12
CITGO service station in Birmingham, Alabama. Source: LatinPetroleum.com
CITGO will work with each marketer to ensure the transition is as
smooth as possible for their operations and customers, according to
company officials.
“Our commitment to the markets where we are staying is as strong as
ever. This strategy allows CITGO to better serve its customer base by
focusing on reliable supply, competitive pricing and exceptional
customer service,” Rodríguez noted. – LatinPetroleum.com LP
Source: PDVSA for historical data as of August 6, 2006. * = Estimates.
46
Officials demand 35% increase in the price of domestic gas
cylinders
MERIDA. Directors of the National Gas Council of the state of
Mérida, Venezuela asked governmental authorities to increase the
price of domestic gas cylinders by 35%.
“The prices have been maintained for three years, and this has had a
negative impact on the commercialization margins for the product,”
said Jose Luis Rodriguez Jáuregui, director of the Council.
According to calculations provided by the Council, an upward
adjustment of 35% is needed just “to cover costs.”
Rodriguez added that the price of the large gas cylinder sells for
Bs16,000 Venezuelan Bolivars ($7.44) while a small cylinder sells
for Bs3,700 Bolivars ($1.72).
Ever since price controls were implemented in the nation, the price of
the gas cylinders has not changed.
Rodriguez added that four (4) companies have expressed interest in
selling larger gas cylinders in the city. The estimated price of the
larger cylinders is Bs25,000 Bolivars ($11.63).
Venezuela’s Siderúrgica del Orinoco (Sidor) would manufacture
the iron used for the construction of the cylinders, according to
Rodriguez. – LatinPetroleum.com LP
PetroCanada La Ceiba sanctioned by SENIAT
CARACAS. The offices of Petro-Canada La Ceiba where recently
closed for two days by Venezuela’s Taxing Authority or el Servicio
Nacional Integrado de Administración Tributaria (SENIAT by its
Spanish initials) due to tax formalities.
SENIAT announced that the two-day closing related to problems
with the registration of the company’s value added tax (VAT)
corresponding to the fiscal year 2005.
“Irregularities were detected as they related to the VAT that was not
recorded as transactions in the company’s accounting systems,”
according to Andreína Masiani, the manager of the Hydrocarbon and
Mines taxing division.
include the United States of America, with estimated growth rates of
3.1% in 2015 and 2.9% in 2025, while China is estimated to grow at
a rate of 6.4% in 2015 and 6.3% in 2025.
-- CONSUMPTION PATTERNS: The consumption of natural gas is
expected to average 29% by 2025 compared to 25% in 2005; the
consumption of oil is expected to average 41% by 2025 compared to
39% in 2005; the consumption of coal is expected to average 23% by
2025 compared to 23% in 2005; and the consumption of
hydro/nuclear/renewables is expected to average 7% by 2025
compared to 13% in 2005.
-- CRUDE OIL PRODUCTION: Total production of crude oil is
expected to increase from 86.0 million barrels per day (33.3 MMb/d
OPEC and 52.7 MMb/d Non-OPEC) to 94.3 MMb/d by 2010 (37.7
MMb/d OPEC and 56.6 MMb/d Non-OPEC), to 103 MMb/d by 2015
(41.3 MMb/d OPEC and 61.7 MMb/d Non-OPEC); to 110.7 MMb/d
by 2020 (46.8 MMb/d OPEC and 63.9 MMb/d Non-OPEC); to 119.0
MMb/d by 2025 (53.7 MMb/d OPEC and 66.2 MMb/d Non-OPEC).
-- FUTURE ENERGY SUPPLY AND DEMAND: Future energy
supplies will come from Canada, Venezuela, Russia, Middle East,
and the Western Coast of Africa while the US, China and India are
expected to be the three nations with the largest expected increase in
demand. Brazil will continue to grow in both its supply of energy and
its demand.
-- USA ENERGY NEEDS: The production of crude oil from the
USA was 9.3 MMb/d in 2002 compared to total consumption of 19.9
MMb/d in 2002. By 2025, the production of crude oil from the USA
is expected to average 8.6 MMb/d while total consumption is
expected to average 28.3 MMb/d. As such, by 2025, the USA will
need to import 70% of its energy (oil) needs compared to 53% in
2002. The trends show China on a similar trajectory.
-- DEMAND FOR PRODUCTS: The demand for fuel oil is declining
at an average rate of 1% per year while the demand for combustible
for transportation is increasing on average 2-3% per year.
-- REFINING CAPACITY: Global demand for oil is expected
increase from 82.3 MMb/d in 2004, to 90.4 MMb/d in 2010 and
106.7 MMb/d in 2020 while world refining capacity is expected
increase from 84.6 MMb/d in 2004, to 98.5 MMb/d in 2010 and
116.3 MMb/d in 2020.
to
to
to
to
According to SENIAT, PetroCanada reported exports of 1.2 million
barrels of Lagotreco Mediano crude oil in 2005 that generated
revenues of $51.6 million for the company.
Likewise, incremental oil demand is expected to increase from 2.9
MMb/d in 2004, to 8.1 MMb/d in 2010 and to 16.3 MMb/d in 2020
while incremental refining capacity is expected to increase from 0.7
MMb/d in 2004, to 13.9 MMb/d in 2010 and to 17.8 MMb/d in 2020.
PetroCanada is a branch of the German company with the same
name. In Venezuela, the company is involved in the exploration and
exploitation of crude oil through is local unit, Agencia Operadora
La Ceiba. – LatinPetroleum.com LP
Refining capacity as a percentage of oil demand is expected to
increase from 103% in 2004 to 109% in 2010 and 109% in 2020.
This growth will require the construction of the equivalent of 20 large
refineries with an equivalent capacity of 14 MMb/d.
Baker Energy de Venezuela Conducts Heavy Oil Workshop
CARACAS. Raul Paez, Technology Manager for Baker Energy de
Venezuela, C.A. recently spoke about the importance of Venezuela’s
extra heavy crude oil reserves which currently total 80 billion barrels.
Some of the most important topics discussed during the course by
Raul Paez, Technology Manager, include:
-- WORLD DEMAND: Economic demand worldwide for energy and
petroleum will average 3.9% in 2015 and 3.6% in 2025, compared to
4.3% in 2005. The nations with the highest average growth rates
-- PROBABLE RESERVES: As of 2006, the Middle East had the
largest number of probable crude oil reserves at 743.4 billion barrels,
followed by North America (213.0 billion barrels), Central and South
America (103.3 billion barrels), Africa (102.5 billion barrels), Eastern
Europe and Russia (79.2 billion barrels), Asia (35.9 billion barrels)
and Western Europe (14.9 billion barrels).
-- TOP TEN RESERVE HOLDERS: Saudi Arabia (262 billion
barrels), Canada (180 billion barrels), Iraq (113 billion barrels),
United Arab Emirates (98 billion barrels), Kuwait (97 billion barrels),
Iran (90 billion barrels), Venezuela (80 billion barrels, excludes 235
billion barrels of extra heavy oil reserves), Russia (60 billion barrels),
Libya (30 billion barrels) and Nigeria (24 billion barrels).
47
-- RECOVERABLE RESERVES: Of the reserves worldwide: 952
billion barrels are classified as conventional, 434 billion barrels are
classified as heavy and 651 billion barrels are classified as natural
bitumen.
-- ORIGINAL OIL IN PLACE IN VENEZUELA’S FAJA:
According to estimates provided by PDVSA, Venezuela’s heavy oil
Orinoco belt contains 1,360 billion barrels of estimated original oil in
place (OOIP) as summarized by area: Boyaca (489 billion barrels),
Junin (557 billion barrels), Ayacucho (87 billion barrels) and
Carabobo (227 billion barrels). Assuming an estimated recovery
factor of 17.3%, Venezuela could add another 235 billion barrels to
its existing 80 billion barrel reserve figure.
The process of quantifying these reserves is ongoing in Venezuela
and includes the assistance of Petropars from Iran, Petrobras from
Brazil, ONGC from India, Lukoil and Gazprom from Russia,
CNPC from China, Repsol-YPF from Spain, Total from France,
Chevron Corporation from the USA, and Shell from the
Netherlands. – LatinPetroleum.com LP
Petrobras to spud San Carlos well during the latter part of 2006
CARACAS. Petrobras estimates it will commence exploratory
activities in San Carlos in the state of Cojedes by year-end 2006,
according to Jorge Luis Sanchez, president Venezuela’s Ente
Nacional del Gas (ENAGAS).
Petrobras acquired the license for the operations of San Carlos from
Argentina’s Perez Companc in 2001 but due to economic reasons
was not able to continue with that company’s development plans for
the area.
Petrobras, in a joint venture with PDVSA, has processed the seismic
data of the area and expects to spud a natural gas well near San
Carlos, located some 185 miles southwest of Caracas, by year-end
2006.
The well will be drilled to a targeted total depth of 15,000 feet. –
LukOil Overseas joins AVHI’s elite list
CARACAS. The Venezuelan Hydrocarbon Association (AVHI by
its Spanish abbreviation), an institutional organization comprised on
national and international oil companies, announced the incorporation
of Lukoil Overseas Holding as the newest member of the
association. With this newest addition, AVHI is now comprised of 27
member companies.
The Moscow-based Lukoil is a vertically integrated petroleum
company involved in all aspects of the hydrocarbon value chain.
Lukoil specializes in the areas of exploration and production,
refining, petrochemicals and trade of products derived from
petroleum. Lukoil ranks second worldwide in regards to proven
hydrocarbon reserves and sixth worldwide in regards to the
production of hydrocarbons. The company holds 1.3% of the proven
reserves worldwide while it accounts for 2.1% of worldwide
petroleum production. Further, the company controls more than 18%
of Russia’s total production and refining capacity.
Lukoil is a private company with more than 850 million shares
distributed to more than 57,000 national and international
shareholders. In Russia, Lukoil is the largest company in terms of
annual sales of more than $30 billion. The company’s initial public
offering on the London stock exchange in 2005 was the largest by a
foreign company.
In Venezuela, Lukoil is currently in the process of certifying the
crude oil reserves located in the Junín Block located in the Orinoco
heavy oil belt (or Faja).
In total, Venezuela’s four (4) Faja blocks contain estimated reserves
in place of 1,360 billion barrels based on estimates from state oil
company, Petroleos de Venezuela (PDVSA), as summarized.
Faja Block
Estimate Reserves in Place
Junin
Boyaca
Ayacucho
Carabobo
TOTALS
557 billion barrels
489 billion barrels
87 billion barrels
227 billion barrels
1,360 billion barrels
Through the reserve certification process currently in process,
Venezuela - assuming a recovery factor of 17.3% - expects to add
another 235 billion barrels of reserves to its existing 80 billion barrels
as reported and recognized in the international markets.
Other AVHI members include:
- Anadarko Venezuela, S.R.L.
- BP Venezuela Holdings Limited
- Chevron Corporation Latin America E&P
- CNPC America LTD
- Conoco Venezuela LTD
- Consorcio Onado
- Eni Dación B.V.
- ExxonMobil de Venezuela, S.A.
- Harvest Vinccler C.A.
- Hocol Venezuela, B.V.
- Inelectra S.A.C.A.
- Mitsubishi Venezolana C.A.
- Otepi, S.A.
- Pluspetrol de Venezuela, S.A.
- Perenco Venezuela S.A.
- Petro-Canada Venezuela, S.A.
- Petrobras
- Repsol YPF Venezuela S.A.
- Shell Venezuela, S.A.
- Statoil International Venezuela, A.S.
- Suelopetrol C.A.
- Tecnoconsult S.A.
- Tecpetrol de Venezuela S.A.
- Teikoku Oil de Venezuela C.A.
- Total
- Vinccler Oil and Gas, C.A.
By LatinPetroleum.com LP
Shell Lubricantes looking to increase lubricant sales in 2006
CARACAS. Shell Venezuela’s Lubricants division, Shell
Lubricantes, reported sales of its lubricants in Venezuela in 2005
totaled 21,508 metric tons, up 14% compared to the company’s sales
expectations of only 18,800 metric tons.
For 2006, Shell Lubricantes expects sales of its products to meet or
exceed the sales figures reported in 2005.
48
At year-end 2005, Shell’s state of the art lubricants plant in Valencia
reported annual production of 25,400 metric tons, the highest
production mark achieved since the plant’s construction in 1997.
“The lubricants plant in Valencia was conceived with two intentions,
to take care of the national automotive and industrial lubricants
market and to export these products to neighboring nations,”
according to Shell Venezuela’s President, Sean Rooney.
Looking forward to the remainder of 2006, Shell Lubricants expects
to focus its attention on five (5) key lubricant purchasers composed
of: general consumers, transportation, industry, marine and aviation.
“What is key for Shell Lubricantes in 2006 is strengthening our
commercial alliances with automobile concessionaries,” according to
Ricfel Olaizola, Manager of Shell’s Control Canals in Venezuela.
In the greater Caracas metropolitan area, home to nearly 40% of all
the automobiles in Venezuela, Shell Lubricantes’ products are sold
through its authorized distributors, Disbeca Oil and Disbattery. –
Shell evaluates new investment opportunities in Venezuela
CARACAS. Royal Dutch Shell president, Jeroen van der Veer, and
Venezuela’s Chancellor, Alí Rodriguez Araque, discussed the
different investment possibilities as well as the potential collaboration
in the areas of technology, whereby the Dutch company could
continue to participate in Venezuela’s hydrocarbon industry.
The name changes apply to Petrolera Mata S.A., Petromiranda
S.A. and Petrorinoco S.A. which will now be renamed Petrokariña
S.A., Petrocumarebo S.A. and Petrodelta S.A., respectively.
Old names
New names
Petrolera Mata S.A.
Petromiranda S.A.
Petrorinoco S.A.
Petrokariña S.A.
Petrocumarebo S.A.
Petrodelta S.A.
“It might appear to be a small act not of much importance or a simply
a formality of the administrative, but this is an expression of the
sovereignty and of the autonomy of the powers where the Venezuelan
National Assembly exerts control over the mixed companies,”
according to Mario Isea of the Energy and Mines commission. Isea is
also a deputy of Patria Para Todos. – LatinPetroleum.com LP
Private Company Social Investments Insufficient or Sufficient?
CARACAS. Among strategic associations, mixed companies (before
operating agreements), exploration agreements and shared gains, oil
companies with E&P activities in Venezuela have disbursed a
reasonable sum of $26,900 million since 1992, according to
Venezuela’s daily newspaper, El Universal. An amount that has
converted these companies in the number one private investor in the
nation with a contribution that is about 10% of the nation’s total
Gross Domestic Product (GDP).
According to details released in a press bulletin from the office of
Venezuela’s Ministry of External Relations, Van der Veer
discussed the future of his company in Venezuela with government
officials.
In their discussions, Van der Veer indicated that the constitution of
the new mixed companies was the best way for Venezuela to run its
hydrocarbon industry.
Van der Veer also announced the interest of his company to introduce
new ideas in the future as they related to long-term investments in the
nation’s heavy oil Orinoco belt (the Faja).
Furthermore, Van der Veer also announced that their exist three (3)
investment options for Shell in Venezuela including the creation of
the new mixed company or JVs, work in the Faja and the sale of
products such as lubricants, among others, that serve the nation’s
aviation industry.
Shell’s presence in Venezuela dates back to 1913 when the company
discovered the Zumaque-1, the first oil well in the nation. The
Zumaque-1 is located in the Mene Grande field some 120 kilometers
southeast of the city of Maracaibo in Zulia state. –
Venezuela’s National Assembly approve name changes to three
(3) mixed companies (JVs)
CARACAS.
Venezuela’s
National
Assembly
approved
recommendations from President Hugo Chavez to change the names
of three (3) mixed companies or joints ventures (JVs) that operate in
Venezuela. The name change was requested as the names for the JVs
were already existed.
Third-world electricity connections in a Caracas slum. Photo: Jose Orozoco.
However, the administration of President Hugo Chavez is still not
content with what the private companies that participated in the
opening (Apertura) of Venezuela’s oil sector have left the nation.
A study carried out a year ago by CDS and Arthur D. Little for the
Venezuelan Hydrocarbon Association (AVHI by its Spanish
abbreviation) to measure the impact of social investments made by its
member companies showed that the annual investment of these
companies rose exponentially from less than a $1 million in 1994 to
almost $9 million in 2004.
Luis Xavier Grisanti, president of the AVHI, emphasized that the
local subsidiaries of the E&P companies present in Venezuela started
to take a more proactive approach to sustainable development in
2002, in accordance with orders from the head offices abroad.
49
Notwithstanding, Grisanti recognized that it was not until Chavez’
government began to exert pressures on the companies that
substantial changes, in regards to sustainable investments, were seen.
Community Aspect
The study also revealed that between 1994 and 2002 these private
E&P companies were responsible for shooting more than 20% of the
2D seismic and more than 50% of 3D seismic in the nation.
Of the investments made by these companies in exploration and
production during the same period, 62% of their investments went to
the drilling of conventional, horizontal, exploratory and advanced
(smart) wells.
With respect to national content, the local purchase of materials made
by these companies was on averaged 50%, a percentage equal to that
registered by PDVSA. However, the study reveal that this number
has dropped from the 60% registered in 1998, and was 37% in 2004.
With regard to the social investment itself, the areas of major
incidence have been projects to alleviate the scarcity of health
services, lack of education, low family income, roads, and
infrastructure maintenance and welfare provisions. To date, nearly
1.22 million people have benefited directly and indirectly.
Labor Aspect
In the area of human resources, the study found that the petroleum
private sector employs a high proportion of Venezuelans. These
percentages rose from 78% in 1998 to 92% in 2004. Nevertheless, in
regards to the remunerations that these companies pay as opposed to
the national average fell from 9.5 to 1 in 1998 to 8.5 to 1 in 2003,
primarily as a result of inflation.
In complete numbers, the remunerations to workers rose from $20
million in 1998 to about $130 million in 2002, and were then reduced
to $70 million in 2004. The decline in 2004 reflects the slow recovery
of the industry in the aftermath of the national strike in 2002-03.
In the last eight years, the companies have registered 61% of their
employees in advanced training courses, a remarkable increase since
2002. Further, on average 72% of those programs were conducted in
Venezuela, even though a decreasing tendency has been observed
since 1997. – LatinPetroleum.com LP
La Electricidad de Caracas shares now traded in Latibex,
opening at 7.85 euros
MADRID. La Electricidad de Caracas (EDC), the largest private
electric utility in Venezuela, listed its shares in the Madrid Stock
Exchange (Latibex), the most important Latin American securities
exchange in the world, under the modality of ADSs. The opening
price of the stock in Latibex was 7.85 euros per ADS.
The formal listing of EDC securities took place during a ceremony
held in the Parquet Room of the Madrid Stock Exchange, with the
active participation of Andrés Gluski, Chairman of the Board of EDC
and AES Corporation President for Latin America; EDC CEO
Julián Nebreda; VP for Corporate Affairs & Investor Relations
Scarlett Alvarez; VP for Legal Affairs Arminio Borjas; Venezuelan
Securities Exchange President Fernando de Candia; Caracas Stock
Exchange President Nelson Ortiz; and Venezuelan Ambassador in
Spain Arévalo Méndez Romero, as well as various Latibex
representatives.
After the traditional ringing of the bell signaling that trading has
begun in the stock exchange, Julián Nebreda addressed guests, stating
that, “our presence in Latibex allows us to reaffirm our role as
pioneers in innovation, with cutting edge technology and expert
personnel. La Electricidad de Caracas has become a financially solid
leader in the Venezuelan electric sector as a result of its efforts to
generate capacities and enhance the quality of life of Venezuelans.”
According to Antonio Zoido, President of Spanish Bourses and
Markets (BME by its Spanish acronym), “the participation of EDC
in Latibex reflects the bourse’s expanding links with other Latin
American stock markets and gives investors more opportunities to
diversify their portfolios toward Venezuela, a new country in the
region.”
In turn, Andrés Gluski pointed out that “the presence of La
Electricidad de Caracas in Latibex allows us to consolidate our
leading role in the Venezuelan electric sector as a financiallyoriented, high-execution company with sound governance and a clear
calling to contribute to the sustainable development of our nation.”
Nebreda added that, “by listing EDC’s ADSs in Latibex, our
securities can be traded in a wider range of markets. This is part of
our strategy to democratize the stock capital of the company, an
initiative that also includes the recent issue of new shares targeting
our employees and the public at large, all of which leads to a broader
stock base for EDC.”
La Electricidad de Caracas assets total approximately 2,208.6 billion
Bolivars. Its stock is traded in the Caracas Stock Exchange and its
ADRs are dealt in the USA Over-the-Counter market under the
symbol ELDAY.PK.
La Electricidad de Caracas is the first Venezuelan company to list its
shares in Latibex, an international stock market where Latin
American shares are traded. This allows the company to diversify
transactions of its stock in the European market. –
Tesoro Corporation interested in buying CITGO Corporation
refinery
SAN ANTONIO. The US-based refinery, Tesoro Corporation,
announced it is negotiations to acquire the 270,000 barrels per day
(b/d) Lyondell-Citgo Refining L.P. refinery, in an agreement valued
at $4.0 billion, according to sources in Houston.
Tesoro is interested in taking possession of the refinery located in
Houston, Texas sometime between mid-August 2006 and lateOctober 2006.
The refinery is jointly owned by CITGO Corporation, a subsidiary
of Venezuela’s PDVSA, and the US chemical company, Lyondell
Chemical Company.
According to Tesoso spokeswoman, Natalia Silva, “Tesoro will
evaluate all of its options in order to analyze everything to make sure
the acquisition is right for us."
CITGO spokesperson, David McCollum, announced, “We have no
comments on the present negotiations.”
In April 2006, both companies agreed to put the refinery, designed to
primarily process Venezuelan crude oil, on the auction block. –
50
BRAZIL CRUDE OIL AND NGL PRODUCTION TRACKER
Brazil: Crude Oil and NGL Production (Mb/d)
OFFSHORE
Other
Total
Year
Campos
Onshore
Total Brazil
Int’l
Total
2000
992.1
48.7
1,040.9
229.9
1,270.7
52.9
1,323.6
2001
1,052.5
44.2
1,096.8
239.2
1,336.0
42.9
1,378.9
2002
1,217.5
39.8
1,257.3
242.7
1,500.1
35.3
1,535.4
2003
1,252.4
39.4
1,291.7
248.4
1,540.1
160.9
1,701.0
2004
1,203.7
38.3
1,242.0
250.6
1,492.6
168.5
1,661.1
2005
1,404.7
35.9
1,440.6
243.5
1,684.1
162.8
1,846.9
2006A
1,457.4
64.8
1,522.2
232.0
1,754.2
148.3
1,902.6
Jan.
Feb.
Mar.
Avg. 1Q:06
1,484.1
1,477.8
1,457.9
1,473.3
33.0
50.3
57.1
46.8
1,517.1
1,528.0
1,515.0
1,520.0
233.4
230.2
231.1
231.6
1,750.5
1,758.2
1,746.1
1,751.6
156.9
158.7
159.4
158.3
1,907.4
1,917.0
1,905.5
1,909.9
Apr.
May.
Jun.
Avg. 2Q:06
1,500.5
1,478.0
1,345.9
1,441.5
58.4
86.0
103.7
82.7
1,559.0
1,564.0
1,449.6
1,524.2
236.0
229.0
232.3
232.4
1,795.0
1,792.9
1,681.9
1,756.3
133.5
140.6
141.3
138.5
1,928.4
1,933.5
1,823.3
1,895.1
Jul.
Aug.
Sep.
Avg. 3Q:06
Oct.
Nov.
Dec.
Avg. 4Q:06
51
BRAZIL NATURAL GAS PRODUCTION TRACKER
Brazil: Natural Gas Production (MMcf/d)
OFFSHORE
Other
Total
Year
Campos
Onshore
Total Brazil *
Int’l **
Total
2000
576.5
229.2
805.8
518.7
1,324.5
123.3
1,447.8
2001
601.3
218.5
819.8
571.7
1,391.5
160.2
1,551.7
2002
690.1
212.5
902.6
608.6
1.511.2
137.7
1.648.9
2003
657.2
187.6
844.8
658.3
1,503.0
510.1
2,013.1
2004
644.9
183.7
828.6
761.9
1,590.5
564.9
2,155.4
2005
752.4
171.9
924.3
718.5
1,642.8
575.4
2,218.3
2006A
808.0
183.5
991.5
664.2
1,655.6
585.5
2,241.2
Jan.
Feb.
Mar.
Avg. 1Q:06
763.1
800.3
828.2
797.2
162.0
185.7
178.2
175.3
925.1
986.1
1,006.4
972.5
653.4
649.6
644.9
649.3
1,578.5
1,635.7
1,651.3
1,621.8
573.1
594.6
611.1
592.9
2,151.6
2,230.3
2,262.5
2,214.8
Apr.
May.
Jun.
Avg. 2Q:06
798.8
848.3
808.2
818.4
183.4
191.3
200.9
191.9
982.2
1,039.6
1,009.2
1,010.3
691.1
676.4
669.3
678.9
1,673.3
1,716.0
1,678.5
1,689.3
523.0
599.7
611.5
578.1
2,196.3
2,315.7
2,289.9
2,267.3
Jul.
Aug.
Sep.
Avg. 3Q:06
Oct.
Nov.
Dec.
Avg. 4Q:06
Notes:
* Includes reinjected gas.
** In 2003, data include Petrobras Energia (ex-PECOM)
52
Colombia Bid Rounds
Caribbean Offshore 2006
Cesar-Ranchería 2007
Sinú-San Jacinto 2007
Soápaga 2007
Pacific Offshore 2008
Llanos Heavy Oil Belt
Photo courtesy of Colombia’s Hydrocarbon Association (ANH).
53
Fitch Ratings
Service yard located along Lake Maracaibo in Venezuela’s Zulia state. Photo: LatinPetroleum.
Downgrades Venezuela’s Heavy Oil projects
NEW YORK. In its report titled, Venezuela’s Heavy Oil Projects:
The Beginning of the End?, Fitch Ratings downgraded the senior
secured debts of Petrozuata Finance Inc. (PZ) Cerro Negro
Finance, Ltd. (CN) Sincrudos de Oriente Sincor, C.A. (Sincor)
and Petrolera Hamaca, S.A. (Hamaca) from ‘BB’ to ‘B+’. The
ratings remain on Rating Watch Negative.
The Rating Watch Negative signals that additional downgrades are
highly probable in the short term. The expectation of further credit
deterioration considers the government’s announced intention to
restructure the association agreements between Petroleos de
Venezuela S.A. (PDVSA) and the foreign producers participating in
these projects as “mixed enterprises.”
The downgrade considers the ongoing policy shifts affecting private
and foreign hydrocarbon producers in Venezuela. Specifically, on
May 11, 2006 the National Assembly amended the Organic
Hydrocarbon Law of 2001 to levy a new oil extraction tax at the rate
of 33.33% on the strategic associations for the development of extraheavy crude oil (EHCO) of the Orinoco Basin.
Fitch believes the restructuring could seriously impair the project’s
operations, assuming that the legal and economic hurdles to effect it
are overcome. In essence, the downgrade and Negative Watch status
are directly attributable to government policy. Notwithstanding the
rating downgrade and Negative Watch status, all four projects are
operating successfully and exceeding expectations.
This new tax is calculated on the value of crude at the wellhead. The
downgrade also considers the effect on project cash flows of the
increase in corporate income tax to 50% from the current preferential
rate of 34% that was announced by the government. The higher gross
revenue and net income levies will, under Fitch’s assumption for oil
prices in the medium term, reduce cash available for debt service
(CADS) significantly.
High oil prices have enhanced profitability and cash flows
substantially, enabling the projects to distribute surplus cash to their
sponsors, including PDVSA. Were it not for the actions and
intentions of the government, the projects’ debt ratings would be
significantly higher. However, the heavier royalty and tax burdens,
combined with persistently high inflation in Venezuela, worsen
54
operating costs, which increase the projects’ vulnerability to an
abrupt or even gradual decrease in oil prices.
On Feb. 15, 2000, Fitch published a special report, “Petrozuata: The
End of the Beginning,” marking the completion of Petrozuata’s
construction. In the report, Fitch highlighted its mostly positive views
on the factors that mitigated the key credit risks to which bondholders
are exposed. As government policy has unraveled in the past six
years, Fitch’s outlook on the operating and financial future of
Venezuela’s EHCO projects is decidedly less optimistic.
Venezuela’s Heavy Oil Projects: The Beginning Of The End?
Project Profile
Notwithstanding the rating downgrade to ‘B+’ and Negative Rating
Watch status as of May 11, 2006, Fitch recognizes that the operating
and financial performance of the EHCO projects has exceeded
expectations, as demonstrated by the financial disclosure for 2005.
The credit profile of the projects remains consistent with ratings
significantly higher than the ‘B’ category.
However, recently enacted royalty and tax increases, as well as other
Venezuelan government measures, impose a severe constraint on
creditworthiness. In our estimates of the impact of the new tax on
project cash flows, we have assumed it is calculated in the same way
as the royalty. Detailed regulations on the royalty and tax changes
have not been published.
Petrozuata
Petrozuata is designed to extract approximately 120,000 barrels per
day (b/d) of EHCO (9º–10º American Petroleum Institute [API]
gravity) from wells in the Orinoco Basin and upgrade the EHCO to
produce an average of 108,000 b/d of synthetic crude oil, or
“syncrude” (15º–17º API), for export.
Mechanical completion was achieved in November 2000. The first
commercial lifting of syncrude occurred on April 12, 2001, initiating
the 35-year operating life of the association agreement between
subsidiaries of PDVSA and subsidiaries of Conoco. Petrozuata’s
rated debt consists of three series of bonds issued in 1997 that were
initially rated ‘BBB+’: $300 million 7.63% series A due 2009, $625
million 8.22% series B due 2016 and $75 million 8.37% series C
Bonds due 2022. Total funding for the project totaled $2.4 billion
(including bank loans, sponsor equity and cash). At Dec. 31, 2005,
the outstanding debt balance was $1.2 billion, of which $925.9
million was composed of the senior secured bonds.
Petrozuata benefits from long-term contractual commitments from its
two sponsors: ConocoPhillips (issuer default rating [IDR] of ‘A–’
Stable Outlook by Fitch), whose subsidiaries hold 50.1% of the
equity in the project, and PDVSA (foreign currency IDR of ‘BB–’
Stable Outlook by Fitch), whose subsidiaries hold 49.9%. Under the
offtake agreement, the sponsors purchase all of Petrozuata’s syncrude
production over the 35-year term of the agreement for their respective
refinery systems. The two sponsors are obligated to purchase any
unsold volumes at market prices referenced off Maya crude. The
complete mitigation of volumetric risk represents a key credit
strength.
Petrozuata’s EHCO production rose to 122,000 b/d in 2005 from
108,900 b/d in 2001. During that period, Maya crude prices rose to an
average of $36.92/barrel (bbl) over the $13.86–$15.30 range assumed
in the base case at the time of the project’s financing. Consequently,
net revenues rose to a record $1.3 billion despite higher royalty
payments, and net earnings (after income taxes) totaled
approximately $600 million. Cash flows amply covered total debt
service (3.80 times [x]) in 2005. Under full implementation of the
royalty and tax increases and assuming a West Texas Intermediate
(WTI) price of $55 per bbl, Petrozuata’s CADS would decline 46%
and debt-service coverage would decline to 1.57x.
Cerro Negro
Cerro Negro is an unincorporated joint venture formed in 1997
among three subsidiaries of the following sponsors: ExxonMobil
(Mobil Cerro Negro, Ltd., 41.67%), PDVSA (PDVSA Cerro
Negro, S.A., 41.67%) and Veba Oel—now BP plc— (Veba Oil and
Gas Cerro Negro GmbH 16.66%).
Together, the sponsors created Cerro Negro to construct, finance and
manage the project. As appointed by the three sponsors, the project is
operated by Operadora Cerro Negro (OCN), a wholly owned
subsidiary of ExxonMobil.
Similar to Petrozuata, the $1.6 billion project comprises field
facilities and upgrader and pipeline systems designed to deliver an
average of 105,000 b/d of 16.6º API syncrude. In September 2001,
the upgrader was completed, and the project commenced synthetic
crude oil commercial production.
The project was funded with a mixture of bonds issued by Cerro
Negro, a bank loan, sponsor equity and cash amounting to $1.7
billion. Veba Oel did not participate in the financing of the project.
The bonds were offered in three separate tranches and were rated
‘BBB+’ at issuance: $200 million 7.33% bonds due 2009; $350
million 7.90% bonds due 2020 and $50 million 8.03% bonds due
2028. At Dec. 31 2005, the total outstanding debt amounted to $720.8
million, of which $511 million constituted the senior secured bonds.
Under a 35-year offtake agreement, all of Cerro Negro’s production
is received by Chalmette Refinery LLC (a joint venture of Mobil
and PDVSA) in Louisiana and Veba Oel’s refinery system in
Germany.
In 2005, Cerro Negro’s EHCO production rose to an average of
120,000 b/d, and synthetic crude production averaged 108,200 b/d.
Syncrude production was 109,300 b/d compared with a design basis
of 108,000 b/d.
As of year-end 2005, project revenues rose to $1.5 billion from $1.1
billion in 2004. Net income rose less in relative terms due to the
effect of higher royalty expenses to $611.3 million from $495.1
million. Similar to Petrozuata, royalties and the corporate income tax
combined to reduce gross revenue by 40%. Debt-service margins
reached nearly 9.0x during the year. Under the new royalty and tax
regime and assuming a WTI of $55 per bbl, CADS would decline
36% and debt-service coverage would decline to 4.61x.
Sincor
Sincor’s $5 billion oil development project is sponsored by Total
(47%), PDVSA (38%) and Statoil (15%). The project, which
achieved full completion in February 2006, produces approximately
150,000 b/d of syncrude. Unlike the output of Petrozuata and Cerro
Negro, Sincor’s product is a 30º–32º API low sulfur oil. Its market
price compares with Nigeria’s Bonny crude and WTI. The first cargo
of syncrude occurred in March 2002, initiating the term of the 35year association agreement.
Sincor was funded in 1998 with a senior bank loan ($1.2 billion),
sponsor loans ($1.5 billion), and sponsor equity and cash ($1.9
billion). Fitch rated the senior bank loan ‘BBB+’ in 1998. A debt
buy-down option was exercised in February 2006 that reduced the
outstanding balance of the rated loan by $16 million to $868.1
55
million. A scheduled amortization payment of $62.0 million was
made on Feb. 14, which reduced the debt outstanding balance further
to $806.1 million.
Unlike Petrozuata and Cerro Negro, Sincor’s production is not
designated to any offtaker. Sincor relies on the unique qualities of its
syncrude for market acceptance. Fully four-fifths of the Zuata Sweet
output is sold to U.S.-based producers on the U.S. Gulf Coast
(USGC), including Sunoco, Inc. (IDR of ‘BBB’ by Fitch), Valero
Energy Corporation (IDR of ‘BBB’ by Fitch) and Chevron (IDR of
‘AA’ by Fitch). Approximately 13% of the syncrude is sold in the
Caribbean, mostly to Hovensa LLC (secured debt rated ‘BBB’ by
Fitch) in the U.S. Virgin Islands.
Market risk is
mitigated by 35year
offtake
support
agreements. All
three
sponsors
have agreed to
guarantee
production
volumes to the
extent of their
share in the
project.
In
addition, Total
and
Statoil
backstop
PDVSA’s
offtake support
obligation if it is
unable to take its
respective
portion of the
production
volumes, which
represents
cumulative
offtake support
obligations
of
75.8% for Total
and 24.2% for
Statoil.
In 2005, Sincor
earned profits of
$2.1 billion on
revenues of $3.2
billion, 58% more than its 2004 net earnings. Royalties totaled $489
million (15% of gross revenue), while cash flows from operations
rose to $2.3 billion from $1.5 billion. Sincor’s outstanding financial
performance reflects a 50% increase in Zuata Sweet production
volumes and a 46% increase in prices ($55.77/bbl in 2005 compared
with $38.26/bbl in 2004). Total debt-service margins reached
approximately 6.0x in 2005. Under the new royalty and tax regime
and assuming a WTI of $55 per bbl, Sincor’s CADS would decline
65% and debtservice coverage would decline to 1.81x.
Hamaca
The project is designed to produce up to 180,000 b/d of 25º API
syncrude. The project is sponsored by subsidiaries of the following:
Phillips Petroleum (40%), PDVSA (30%) and Texaco (30%).
Ameriven oversaw construction and operates the project on behalf of
the sponsors. Hamaca reached full commercial operations in October
2004.
Corpoguanipa, S.A., a PDVSA subsidiary, and Hamaca Holding
LLC borrowed severally to fund the project.
The project was funded in 2001 with the first of an initially planned
two-tranche bank loan due 2015 for $470 million and a $628 million
U.S. Export-Import (Ex-Im) Bank loan due 2018 for a total of $1.1
billion. Initially, Fitch rated this first phase of the debt financing
‘BBB–’. At Dec. 31, 2005, the outstanding balance of the senior bank
loan debt amounted to $445 million and the Ex-Im Bank loan
amounted to $411 million for a total of $856 million. Equity ($1.478
billion) and cash ($306 million) also funded the project’s
development cost. An authorized second debt tranche for up to $1
billion has not been issued to date.
Similar
to
Sincor,
Hamaca sells
its
commercial
production
volumes into
the
USGC
refining
market, and
unlike
Petrozuata
and
Cerro
Negro,
Hamaca does
not benefit
from
a
predesignate
d
refining
relationship
to provide a
secure outlet
for
its
production.
However,
offtake
support
agreements
from
the
sponsors
backstop any
unsold
syncrude
volumes at
an offtake support price (fair market price of Hamaca less $2.00/bl.).
The medium sour synthetic crude sells at a discount to the crude price
of Louisiana Light Sweet (LLS) on the USGC.
Hamaca’s operating and financial performance in 2005 is consistent
with that of the other EHCO projects. Syncrude production reached
57.4 million barrels (bbls) that sold for an average price of $45.8/bbl.
Hamaca earned (net income before tax) $1.8 billion on gross revenue
(before royalties) of $2.3 billion. Debt-service margins exceeded 10x.
Under the new royalty and tax regime and assuming a WTI of $55
per bbl, CADS would decline 26% and debt-service coverage would
decline to 8.09x.
Key Credit Concerns
The strong fiscal and operating performance of the four EHCO
projects demonstrates that despite the unanticipated increase in
royalties that took effect during the last quarter of 2004, buoyant oil
56
prices lifted cash flows available for operating expenses, capital
expenditures and scheduled debt service above expectations.
However, Fitch’s revised project economics for the medium term are
weaker. Higher royalties and taxes, persistent double-digit inflation in
Venezuela, lower oil prices and the government’s imposed limits on
production, could result in net revenue declines of as much as 80%.
In what appears to be the next step in the process of extending
government control to the whole of the hydrocarbon industry and a
complete reversal of the government’s policies that were adopted in
the previous three decades, the Chavez administration announced in
April 2006 its intent to restructure the four strategic associations as
mixed enterprises.
Under these assumptions, the ability of the projects to service debt
obligations in full could be impaired by 2011 or earlier. This negative
outlook contrasts sharply with the original base-case assumptions,
which suggested the projects would continue to cover amply all of
their fixed operating expenses and debt-service payments, even with
prices considerably lower than historical averages.
In essence, the mixed venture entity constitutes a Venezuelan
government-owned, controlled and operated enterprise subject to
Venezuelan laws and regulations, as though it were wholly owned by
the state. The salient distinction between a state company and a
mixed venture is that the latter benefits from the equity or debt
financing (or both) of a silent, nongovernment partner.
Fiscal Instability
The precise terms of the restructuring have not yet been announced
and, therefore, the foreign partners have not indicated whether they
accept or reject the government’s plan. However, the government
expects the partners to accept a new contract structure in which
PDVSA would raise its take in the EHCO project to 60%.
Royalties were increased by the Venezuelan government, ahead of
schedule, in October 2004. At that time, the Ministry of Energy
informed the EHCO associations that the royalty rate of 16.66%
would take effect immediately.
PDVSA As Operator?
Although the Ministry of Energy was empowered by the
Hydrocarbon Law of 1943 to set the royalty rate at its discretion, the
royalty rate increase contravened the terms of the regime that had
been established at the outset and recently confirmed by the ministry.
In the specific case of Petrozuata, which is a representative
illustration, under a letter of agreement dated January 2002 between
the ministry and Petrozuata confirming the terms established in the
initial letter of agreement of October 1998, the royalty rate applicable
to EHCO production was 16.66% during the preoperational phase.
Upon achieving completion and commencing operations, the
applicable royalty rate was 1%. This preferential rate was to remain
in effect for the next nine years, starting on April 12, 2001 (the date
of Petrozuata’s full commercial operations), or until sufficient
revenues from product sales are realized to cover 3x the initial project
investment, whichever came first. After completing the nine-year
period or meeting the revenue test, the rate reverts to 16.66%.
On Nov. 13, 2001, Venezuelan President Hugo Chavez sanctioned
the new Organic Hydrocarbon Law, which became effective on Jan.
1, 2002. Under this law, the royalty rate was increased to 30%, but it
may be reduced to a minimum of 20% for mature or EHCO fields
and 16.66% for bitumen fields.
Consequently, Petrozuata’s royalties increased five times in 2005,
while Hamaca’s increased 56%. (Among the four EHCO projects,
Hamaca experienced the smallest increase in royalties, reflecting the
recent start of full commercial operations.) The higher royalty
payments attributable to EHCO production in 2004 and 2005 were
made to the ministry under the protest of the foreign sponsors.
On May 11, 2006, the National Assembly, acting on directives from
the president and without much deliberation, amended the Organic
Hydrocarbon Law of 2001 to impose a new oil extraction tax of
33.33%. The regulation and method of computation of this new tax
remain undisclosed. Fitch has assumed that the tax is calculated on
the same basis as the oil royalty.
Fitch anticipates that the announced increase in the corporate income
tax applicable to the EHCO projects from 34% to 50% will also be
implemented in 2006. In addition, in our oil price deck for modeling
and rating purposes, Fitch expects a gradual return to the long-term
historical average in the mid-$20/bl range for WTI by 2009.
The strong operating and financial performance of the projects
heretofore demonstrates the efficacy of the teams assigned by the
sponsors: ExxonMobil, ConocoPhillips, ChevronTexaco, Statoil,
Total and BP. For the sponsors, the projects are strategically
important, as evidenced by the production contribution to the
companies, as well as the initial equity capital contributions to the
projects: Petrozuata, $1.0 billion; Cerro Negro, $700 million; Sincor,
$1.9 billion; and Hamaca, $1.6 billion. All of these foreign
companies, together with PDVSA at the time the projects were first
conceived and implemented, are reputable producers of oil and gas,
ranking at the top of the industry globally.
Fitch’s concerns are partly grounded in the assumption that the
restructuring would put PDVSA in operating control of the strategic
associations, displacing the existing operating teams. PDVSA is
affected directly by government mandates. Under the Chavez
administration, much of the cash flow generated by the firm is
diverted away to fund social spending and other government
programs, not invested to maintain or increase the firm’s
productivity.
Partly as a result of this forced disinvestment, as well as the severe
loss of technical expertise PDVSA suffered in recent years, the
company now has one-half of the production volume, through its own
efforts (not counting the oil volumes of joint ventures with private
producers under 32 operating agreements), of 1999, when it
generated 3.4 million b/d. As evidence of the inadequacy of the
current strategy and highlighting the operating risk to which the
EHCO projects would be exposed, private producers in Venezuela, in
contrast, increased production from 400,000 b/d to 1.1 million b/d. It
is estimated that PDVSA’s productivity would be 5 million b/d had
the strategies of the previous governments and autonomous
management remained in place.
Legal Uncertainty
As the legal implications of the government’s announced
restructuring of the strategic associations are examined, of note, one
of the most relevant provisions states that any action taken by
Venezuela to confiscate, expropriate or nationalize the ownership or
control of all or any substantial part of the project property, which
prevents the operation of the project substantially as contemplated in
the common security agreements, constitutes an event of default.
Restructuring As Mixed Enterprises
Furthermore, according to the transfer restriction agreements,
transfers of ownership are essentially permitted, but the partners
57
participating in the debt financing of the projects must retain
ownership interest in the strategic associations of not less than a
prescribed minimum. A rating affirmation and consent from the
lenders is also required. Therefore, assuming that the proposed
restructurings are undertaken with the acceptance of the foreign
producers and the debt is not fully repaid ahead of schedule, the
lenders should have some influence in the restructuring process.
To the detriment of creditors, the association agreements are
governed by Venezuelan law. Although disputes are to be resolved
through arbitration in New York, it is doubtful that such procedures
will be respected by the current administration.
sound acquisitions proved valuable for PDVSA as it strengthened its
ranking as a global integrated oil and gas producer.
In the 1990s, both PDVSA and the government recognized that the
EHCO reserves of the Orinoco Basin were a vast resource and key to
the nation’s future. For this upstream activity, PDVSA sought the
partnerships with foreign producers who contributed, among other
things, operational talent, equity funding, innovative technologies and
offtake support (global market access) at a time when oil prices were
very low compared with those experienced in the 1970s and early
1980s. The upstream segment efforts essentially opened up the oil
sector to private producers whose participation had been nearly
extinguished under the Nationalization Law of 1975.
The Beginning Of The End?
The government’s announced restructuring of the EHCO strategic
associations as mixed ventures engenders a distinct possibility that
the projects could become captive entities controlled by the
government. As such, the operating and financial viability of the
projects is likely to turn increasingly uncertain. Although Fitch
believes the projects are more vital to Venezuela today than when
they were initiated, government policy has dramatically reversed in
the past two years.
Whereas government policy supported strong ratings in the past, it
now imposes a formidable constraint on creditworthiness. Despite the
operating risk implied by the mixed venture restructuring, Fitch
believes that in the current high oil price environment, payment
defaults are unlikely.
However, the legal basis that supports the projects’ existence—the
charters and association agreements—and the agreements that govern
the projects’ financings might pose obstacles to the government’s
restructuring plans. It is therefore possible that, unless the
outstanding debts are fully refunded, technical defaults and
enforcement actions initiated by bondholders and lenders will ensue.
However, more directly relevant is the response of the foreign
producers to the government’s restructuring plan, which remains key
to the future form of the projects’ legal existence and operating
control, as well as compliance with the financing covenants. Using
the government’s forced conversion of the 32 operating agreements
into mixed ventures, or enterprises, in 2006 as a guide, it is more
likely than not that the foreign producers will want to remain engaged
in the EHCO projects, even under renegotiated association
agreements that are substantially less favorable to them.
However, Fitch expects that if, as a result, PDVSA takes over full
operating control of the projects rather than just a greater stake in the
revenue and profits, the future economic viability of the four EHCO
projects would become increasingly uncertain.
This policy of open access for private and foreign producers, or
“Apertura,” was fundamentally based on Article 5 of the law, which
enabled the government, with discretion, to allow private
participation in the hydrocarbon sector. Given the provisions of
Article 5, PDVSA, through its wholly owned subsidiaries, decided to
associate with private parties to participate in the development,
exploitation, upgrading and commercial marketing of EHCO
resources located in the Orinoco Basin.
Indeed, both the foreign producers and the subsidiaries of PDVSA
explicitly acknowledged in the agreements that under the Organic
Law, certain activities relating to hydrocarbons, including production,
transportation by special means, storage, refining, and domestic and
foreign commerce, are reserved to the state of Venezuela and entities
owned by the state of Venezuela. It was also acknowledged in the
agreements that under Article 5 of the Organic Law, such activities
reserved to the state of Venezuela and entities owned by the state of
Venezuela may be exercised through an association with privately
owned entities but controlled by the entity owned by the state.
The association agreements between the government and the foreign
producers were approved by the Venezuelan Congress under
resolutions adopted by plenary joint sessions of the lower chamber
and the Senate. Prior to approval, the executive branch of
government, through the Ministry of Energy and PDVSA, transferred
technical and other information to the bicameral multiparty
commission of Congress that reviewed the terms and conditions of
the agreements.
In essence, one branch of government informed another branch
regarding the substantive content of the agreements. Upon the
commission’s recommendations, which were detailed in various
reports, the Congress voted, and the overwhelming majority of its
members agreed with the executive on the EHCO strategic
association agreements. In 1993, the Petrozuata and Sincor
association agreements were approved by the Congress. In 1997, the
Congress issued two resolutions approving the Cerro Negro and
Hamaca accords.
EHCO Strategic Associations: A Backward Glance
Viewed historically, the EHCO projects constitute one part of a broad
scope, long-range strategy implemented by PDVSA and previous
Venezuelan administrations that was initiated in the 1980s. They
recognized at that time that investment in oil and gas development
projects, especially during periods of low oil prices, competed against
social spending and other government priorities and policies.
Consequently, PDVSA embarked on a strategic diversification of its
assets to protect against the entropy that affects state-owned and
operated oil monopolies. Downstream, it acquired CITGO in the
United States and established joint ventures for refineries along the
USGC, which opened the North American market for refined
PDVSA products. PDVSA also bought Ruhr Oel in Germany, which
opened access to key European refinery systems. These economically
Furthermore, the Venezuelan Supreme Court of Justice reviewed the
agreements and the majority ruled in favor of the structure
implemented by the Congress. In its decisions, the court clarified,
among other things, the requirement prescribed by the law that
PDVSA retain control of the associations. According to the court,
PDVSA’s control was appropriately assured not necessarily with
majority ownership but with the privileged shares held by the
company in every EHCO agreement, as well as the conditions
contained in the agreements.
Finally, at the time the financing of the projects was undertaken,
opinions from expert counsel confirmed unequivocally the validity
and legality of the association agreements. – Fitch Ratings, Special
to LatinPetroleum.com LP
58
… at a conference near you
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Caribbean where LatinPetroleum has a conference presence.
LATINPETROLEUM
Latin America’s Petroleum Magazine
59
MERGERS & ACQUISITIONS (M&A) AND DIVESTITURES
Announced
Seller
Buyer (s)
Amt.
Assets
Jul.2006
Mobil
Commercial Repsol
SAC (Recosac)
$27.5mm
Jul.2006
Jul.2006
Jul.2006
Shell
Colombian gov’t
Chevron Corporation
Rubis SA
Terpel SA
-
Network of service stations in Peru. The acquisition is part of RepsolYPF’s goal to increase the number of distribution stations in Peru under
its name to 220.
Marketing business interests in the North Atlantic island of Bermuda.
Up to 20% stake in state oil firm Ecopetrol.
Network of 65 gasoline stations in Ecuador.
Jun.2006
Petroleos del Norte
Taghmen Energy
$32mm
Jun.2006
El Paso Corporation
Companhia
Paranaense de
Energia (COPEL)
$190mm
May.2006
Hydro-Quebec
$67mm
57% interest in Consorcio TransMantaro S.A., a power transmission
company in Peru to Colombian companies, which operate power
transmission systems.
May.2006
Petrolera del Cono
Sur (PCSA)
Interconexion
Electrica S.A. and
Empresa de Energia
de Bogota S.A.
Petróleos de
Venezuela (PDVSA)
$15mm
46% of the Uruguayan ANCAP, including a network of 154 service
stations, storage facilities and a distribution plant in Argentina.
Apr.2006
Apr.2006
Anadarko Brazil Co.
Statoil Venezuela
Avante Petroleum
PDVSA
-
67% interest in Block 1-SES-107D which covers 53 sq. km.
27% interest in LL-652 oil field in Lake Maracaibo, Venezuela.
Mar.2006
ENAP (Sipetrol SA)
Pacific Stratus
Energy
$60.2mm
Mar.2006
Mar.2006
Mar.2006
SEACOR
ExxonMobil
Samson Int’l
Grupo TMM
ONGC
Vinccler Oil and Gas
$57mm
$400mm
-
Assets include 90.6% interest in the Dindal and Río Seco blocks, 27.3%
interest in the Caguan block and 30% in the Acevedo block, a 90.4%
interest in the Guadas-La Dorada pipeline, a 1.2% interest in the Alto
Magdalena pipeline and 1% interest in another pipeline.
SEACOR’s 40% interest in Maritima Mexicana SA de CV.
15% interest in offshore Block (Campos Basin) in Brazil.
Purchase price of $2.0mm in cash + 1.75 million common shares.
Assets in West Falcon Unit in Venezuela.
Feb.2006
Golden Oil
Corporation
Compania General de
Combustibles SA
El Paso Río Claro
Ltda. and El Paso Río
Grande Ltda.
Gran Tierra Energy
$0.95mm
50% interest in the El Vinalar Block in Argentina’s the Noroeste Basin.
Gran Tierra Energy
$37.8mm
Assets in the Noroeste Basin in Argentina.
Petrobras
$357.8mm
MOU signed containing the terms for the acquisition of the companies
El Paso Río Claro Ltda. (Macaé Merchant) and El Paso Río Grande
Ltda (Marketco).
Apache Corporation
$675mm
Jan.2006
Pioneer Natural
Resources
El Paso Corporation
Globeleq Ltd.
$141mm
Jan.2006
Jan.2006A
Jan.2006
Various participants
Astra Oil Company
Dresser Inc.
$370mm
$21.3mm
Jan.2006
Guyana gov’t
Petrobras
Petrobras
Cooper Cameron
Corporation
Rusal
All of Pioneer’s interests in Argentina, including assets producing 32.5
Mb/d of oil.
Six power plants with combined capacity of 304MW net located in El
Salvador, Nicaragua, Panama and the Dominican Republic.
50% interest in PSC covering Block L in Equatorial Guinea, Africa.
50% interest in 100 Mb/d refinery in Texas (USA).
Dresser completes sale of its value business, On/Off in Brazil.
-
Interest in two (2) major bauxite operations.
Feb.2006
Feb.2006
Jan.2006
Three fields in the Middle Magdalena Valley in Colombia, which
produce approximately 1,000 b/d (approximately 500 b/d net).
Combined, the three fields have proven and probable reserves of 6.9
million barrels (net).
60% interest in Araucaria power plant which is a combined-cycle,
484MW, natural gas-fired power plant located in the Parana State,
Brazil.
60
Announced
Seller
Buyer (s)
Amt.
Assets
Dec.2005
Shell Ecuador
-
Fuel distribution business in Ecuador, consisting of 60 services stations.
Dec.2005
Shell
ENAP and Romero
Group
Petrobras
$140mm
Dec.2005
Bridas Corporation
CNPC
$5bn
Colombia (38 service stations); Uruguay (89 service stations); and
Paraguay (134 service stations).
Assets located in Argentina.
Nov.2005
Queiroz Galvao
Perfuracao SA
-
Coplex Petroleo do
Brasil Limitada
Taghmen Energy
$14mm
-
Oct.2005
Rutilex Hidrocarburos
Argentina SA (Rhasa)
PDVSA
$100mm
Oct.2005
-
Kerr-McGee Oil &
Gas Corporation
-
Sep.2005
Shell
Rubis Group
€116mm
Sep.2005
OMV
Sep.2005
EnCana Corporation
$1.42bn
Sep.2005
Repsol-YPF
Burlington Resources
and Perenco
Andes Petroleum
Company
ONGC Videsh Ltd.
Sep.2005
Petrolera del
Comahue SA
BrazAlta Resources
Corp.
PetroAndina
Resources
-
-
Aug.2005
Xstrata Plc
Brascan Corp.
$1.67bn
19.9% interest in Falconbridge Ltd.
Jul.2005
PAV Republic Inc.
Industrias CH SA
and Grupo Simec
-
Plants with combined capacity: 2 mmtpy of liquid steel and 1.7 mmtpy
steel products.
Jun.2005
Jun.2005
BP Trinidad &
Tobago (BPTT)
RMC
Electricite de France
(EDF)
Aceros Camesa SA
and Camesa Inc.
Petrobras
Perenco and Neal &
Massy Energy
Cemex
Grupo Dolphin
$137mm
$299mm
Acquiring assets of 220MW thermoelectric plant in Ceara, Brazil.
Acquiring 3 oil fields (Teak, Samaan and Poui) in Trinidad & Tobago.
$5.8bn
$100mm
Acquiring interest in British cement producer.
Acquiring 100% interest in Edenor, an Argentine electricity distributor.
Wire Rope Corp. of
America
$220mm
Acquiring assets of manufacturer of wire rope.
May.2005
Colombian gov’t
-
May.2005
May.2005
ENSCO Int’l
Parker Drilling
Company
AP Moller
Saxon Energy
Services
Nov.2005
Sep.2005
Jun.2005
Jun.2005
Jun.2005
-
$59mm
$34mm
Acquired an additional 15% interest in the Cavalo Marinhofield and an
additional 30% interest in the Estrela-do-Mar field.
Two licenses (Blk 19 in Belize) and (license 7-98 in Guatemala). Gross
potential reserves estimated at 130 MMbbls.
PDVSA signed a draft agreement to acquire the assets of Rutilex
Hidrocarburos Argentina SA (Rhasa), including a 7 Mb/d refinery
located in the province of Buenos Aires with a distribution network of
62 service stations and its own fuel transport network.
Acquiring a 25% interest in the southern part of Block 2(c) Retained
Exploration Area and a 30% interest in Block 3(a) offshore T&T.
Oil products businesses in the French Antilles and French Guyana. The
assets include 54 retail service stations, distribution assets and facilities,
various petrochemical products and marine businesses geographically
spread across the region. It also includes Shell’s 24% interest in the
SARA refinery in Martinique.
Assets consist of a 25% interest in Block 7 and a 17.5% interest in
Block 21, which combined produce about 5 Mb/d of Ecuadorian oil.
All of the shares in subsidiaries which have oil and pipeline interests in
Ecuador.
Acquires Repsol-YPF’s 30% interest in seven deep-water blocks
located in the Gulf of Mexico offshore Cuba.
An 100% operated interest in the 38,880 acre CN-VI A/B Block in the
Neuquén Basin.
Acquisition of a 47.50% working interest of hydrocarbon rights in four
land blocks known as the Reconcavo area. These blocks produce 300
b/d.
Colombia plans to privatize its gas pipeline company, Empresa
Colombiana de Gas (Ecogas), sometime during the 4Q:05. Estimated
value is $389mm.
Acquiring 6 drilling rigs and related assets.
Acquiring 7 land rigs and related assets located in Colombia and Peru,
(4 rigs for $23mm).
61
INTERNATIONAL ROTARY RIG COUNT
Rig Counts in Latin America Fall to 328 in June 2006 Compared to 333 in May 2006
HOUSTON. The number of rigs actively exploring for oil and natural gas in Latin America declined by 5 to 328 in June 2006 compared to 333 in
May 2006 and 328 in June 2005.
Of the rigs running in Latin America during June 2006, 252 were exploring for crude oil and 73 for natural gas while three (3) were listed as
miscellaneous compared to May.2006, 258 were exploring for crude oil and 73 for natural gas while two (2) were listed as miscellaneous.
In Mexico during June 2006, 44 rigs were exploring for crude oil and 34 for natural gas with two (2) listed as miscellaneous compared to May
2006 when 49 rigs were exploring for crude oil and 38 for natural gas with two (2) listed as miscellaneous. In Venezuela during June 2006, 72 rigs
were exploring for crude oil and 12 for natural gas compared to May.2006 when 71 rigs were exploring for crude oil and 11 for natural gas. In
Argentina in June 2006, 67 rigs were exploring for crude oil and 14 for natural gas compared to May 2006 when 68 rigs were exploring for crude
oil and 14 for natural gas. In Brazil in June 2006, 25 rigs were exploring for crude oil and four (4) for natural gas compared to May 2006 when 28
rigs were exploring for crude oil and four (4) for natural gas
Collectively, 245 rigs or 75% of the total 328 active rigs exploring in Latin America during June 2006 were located in Argentina, Mexico and
Venezuela compared 253 rigs or 76% of the total 333 active rigs, respectively during May 2006. – LatinPetroleum.com LP
Monthly Averages (Land and Offshore Breakout)
REGION
Land
Jun.06’
Offshore
Land
May.06’
Offshore
Land
Apr.06’
Offshore
Land
Mar.06’
Offshore
Land
Jun.05’
Offshore
Europe
Middle East
Africa
Asia Pacific
21
203
35
116
57
32
13
101
25
198
38
116
61
31
12
106
26
201
39
113
55
25
17
109
25
191
38
120
55
30
20
113
25
210
36
109
53
38
17
116
LATAM
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Peru
Trinidad
Venezuela
Other
LATAM Total
81
4
13
22
10
57
5
4
67
3
266
16
23
1
5
17
62
82
3
13
21
11
64
7
66
1
268
19
1
25
4
16
65
79
3
12
1
23
12
61
4
68
1
264
20
1
24
4
14
63
69
3
13
20
12
61
3
1
67
1
250
14
1
24
1
2
14
56
73
2
10
13
13
84
4
2
58
2
261
17
37
12
67
TOTALS
641
265
645
275
643
269
624
274
641
291
Source: Baker Hughes Inc.
Monthly Averages (Gas and Oil Breakout)
REGION
Oil
Jun.2006
Gas
Misc.
TOTALS
Oil
May.2006
Gas
Misc.
TOTALS
LATAM
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Peru
Trinidad
Venezuela
Other
LATAM Total
67
1
25
22
10
44
5
4
72
2
252
14
3
4
34
1
5
12
73
2
1
3
81
4
29
22
10
80
6
9
84
3
328
68
1
28
21
11
49
7
1
71
1
258
14
2
4
1
38
3
11
73
2
2
82
3
32
22
11
89
7
4
82
1
333
Source: Baker Hughes Inc.
62
Argentina Rigs 01.2004 -06.2006
Ecuador Rigs 01.2004 -06.2006
Argentina Oil & Gas Split
Ecuador Oil & Gas Split
16
90
14
80
12
60
Misc
50
Gas
Oil
40
10
Rig Counts
Rig Counts
70
Misc
8
Gas
Oil
6
30
4
20
2
10
0
1/1/04
7/1/04
1/1/05
7/1/05
0
1/1/04
1/1/06
7/1/05
1/1/06
Mexico Rigs 01.2004 -06.2006
Bolivia Oil & Gas Split
Mexico Oil & Gas Split
7
140
6
120
100
Misc
4
Gas
Oil
3
Rig Counts
Rig Counts
1/1/05
Bolivia Rigs 01.2004 -06.2006
5
1
20
1/1/05
7/1/05
Gas
Oil
60
40
7/1/04
Misc
80
2
0
1/1/04
0
1/1/04
1/1/06
7/1/04
1/1/05
7/1/05
1/1/06
Brazil Rigs 01.2004 -06.2006
Peru Rigs 01.2004 -06.2006
Brazil Oil & Gas Split
Peru Oil & Gas Split
40
8
35
7
30
6
25
Misc
20
Gas
Oil
15
Rig Counts
Rig Counts
7/1/04
2
1
1/1/05
7/1/05
0
1/1/04
1/1/06
Oil
3
5
7/1/04
Gas
4
10
0
1/1/04
Misc
5
7/1/04
1/1/05
7/1/05
1/1/06
Colombia Rigs 01.2004 -06.2006
Venezuela Rigs 01.2004 -06.2006
Colombia Oil & Gas Split
Venezuela Oil & Gas Split
30
90
80
25
70
Misc
Gas
15
Oil
10
60
Misc
50
Gas
40
Oil
30
20
5
0
1/1/04
Rig Counts
Rig Counts
20
10
7/1/04
1/1/05
7/1/05
1/1/06
0
1/1/04
7/1/04
1/1/05
7/1/05
1/1/06
63
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MEDIA SPONSORS
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