Cable en el que se informa de que los consorcios liderados por Chevron y Repsol han ganado el proyecto petrolero Carabobo

La Embajada de EE UU cuestiona la capacidad de Repsol para poner en marcha el proyecto más importante que lleva a cabo en Venezuela y apuesta por Chevron para que se coloque como socio principal de Caracas

ID: 248747
Date: 2010-02-12 21:14:00
Origin: 10CARACAS193
Source: Embassy Caracas
Classification: CONFIDENTIAL
Dunno: 10CARACAS11
Destination: VZCZCXRO3009
RR RUEHAO RUEHNG RUEHRS
DE RUEHCV #0193/01 0432114
ZNY CCCCC ZZH
R 122114Z FEB 10
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 0471
INFO OPEC COLLECTIVE
WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RHMFISS/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 CARACAS 000193

SIPDIS
ENERGY FOR ALOCKWOOD AND LEINSTEIN, DOE/EIA FOR MCLINE
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MKACZMAREK
COMMERCE FOR 4332/MAC/WH/JLAO
NSC FOR DRESTREPO AND LROSSELLO
OPIC FOR BSIMONEN-MORENO
AMEMBASSY BRIDGETOWN PASS TO AMEMBASSY GRENADA
AMEMBASSY OTTAWA PASS TO AMCONSUL QUEBEC
AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE

E.O. 12958: DECL: 2020/02/12
TAGS: EPET, EINV, ENRG, ECON, VE
SUBJECT: Chevron "Wins" A Carabobo Project

REF: 10 CARACAS 11

CLASSIFIED BY: Darnall Steuart, Economic Counselor, DOS, Econ;
REASON: 1.4(B), (D)

1. (C) SUMMARY: Chevron and Repsol-led consortia won the rights to
negotiate mixed company deals with the Ministry of Energy and
Petroleum (MENPET) in the Carabobo bid round. In its first major
heavy oil bid round since President Chavez assumed power in 1999,
the Bolivarian Republic of Venezuela (GBRV) offered three Carabobo
projects and received bids on two. While not signing any
agreements, the winning international consortia may now move ahead
to negotiate more favorable contract terms before signature of a
joint venture contract and the initial bonus payment. Chevron said
that first oil might come on line in 2014 but could well be
delayed. The Ambassador was not invited to the Carabobo ceremony
to accompany his colleagues representing the governments of the
other international oil companies that bid. Nevertheless, at the
ceremony, Chavez said he wants dialogue with the U.S. END SUMMARY.



Carabobo Winners Announced



2. (C) PROJECT 3: The February 10 ceremonial event to announce the
winners in the Carabobo bid round started several hours late and
was televised in a mandatory national cadena (broadcast). The
Chevron-led consortia, including Japan's Mitsubishi, Inpex, and
Venezuela's Suelopetrol, won project 3, which includes blocks C5,
C2 South, and C3 North. Chevron's share in the ultimate joint
venture will be 34%, the Japanese participants will have 5%, and
Suelopetrol will have a 1% share. [NOTE: Chevron's Latin America
Business Unit President Wes Lohec (protect) told the Ambassador on
February 12 that Japan's JOGMC has an option to back into a share
of the Japanese 5%. The Japanese participation in the consortium
is particularly important, as it will open the door to possible
JBIC financing for PDVSA's portion of the project costs. END NOTE]
Minister Ramirez stated that the mixed company (60% PDVSA, 40%
Chevron consortia) should eventually produce between 400,000 and
480,000 barrels of crude petroleum per day. When half of the
production is run through an upgrader and mixed with the other half
of production, the mixed company will ultimately take 400,000
barrels of 22-degree API crude to the market. Ramirez stated that
the Chevron consortium offered a bonus of $500 million, a billion
dollars of financing for PDVSA's portion of the project, and an
upgrader to be constructed in Soldedad. Lohec informed the
Ambassador on February 12 that cold crude oil production could
begin as soon as four years from the date a mixed company is formed
and that MENPET had committed to provide 300 million barrels of
blending stock for the first seven years of the project or until an
upgrader is constructed. Lohec added that he doubted whether PDVSA
would achieve any new petroleum production from any of the various
heavy oil projects it has initiated with national oil companies
before 2014.



3. (U) PROJECT 1: Ramirez also announced that the consortium led by
Spain's Repsol, including India's ONGC, Videsh Limited, Oil Indian
Corporation, the Indian Oil Corporation, and Malaysia's Petronas,
won Carabobo's project 1. This includes the blocks C1 North, and
C1 Central. According to Ramirez, Repsol's consortium offered a
bonus of $1.050 billion, $1.0 billion in financing for PDVSA's
portion of the project, and an upgrader in Soledad. Ramirez stated
that this mixed company would also produce up to 480,000
barrels/day of upgraded petroleum at 22 degrees API. Repsol's
proposal included plans to send some of the upgraded petroleum to a
refinery in Bilbao, Spain and "other plants in other countries."
Ramirez stated that the mixed company agreements now to be
negotiated with the two consortia would be sent to the Venezuelan
National Assembly for approval on March 25.

CARACAS 00000193 002 OF 003


4. (U) PROJECT 2: According to Ramirez, the GBRV did not receive
any offers on project 2 and that it would be up to President Chavez
whether Venezuela would develop it on its own or put it back out to
bid in the future.



5. (C) BONUS?: Chevron's consortium offered the minimum bonus for
project 3 (the other two projects had a minimum bonus of $1
billion). Repsol's consortium offered $50 million more than the
minimum bonus payment. Given that project 3 (Chevron) contained
three blocks and project 1 (Repsol) contained two blocks, the
consortia respectively offered $167 million/block and $500
million/block. By contrast, in the bilateral deals announced by
the GBRV for heavy oil projects in the Junin area of the Orinoco
heavy oil belt, the press has reported that Italy's Eni offered a
$646 million bonus for Junin 5, PetroVietnam offered a bonus
between $500 and $600 million, and the Russian oil consortium
(Rosneft, Lukoil, Gazprom, TNK-BP, and Surgutneftegaz) offered $1
billion for Junin 6. Embassy contacts reiterate that, regardless
of the GBRV announcements, no company has yet made a bonus payment
to the GBRV. The Carabobo terms require the first installment of
the bonus payment 14 days after the mixed company documents are
approved by the international consortia's boards of directors and
by the Venezuelan National Assembly. Thus, the GBRV will not
receive any bonus funds from the Repsol or Chevron-led consortia
until the mixed companies have been negotiated and approved.



6. (C) Mixed Company Formation: On February 11, Chevron President
for Africa and Latin America Ali Moshiri clarified for the
Ambassador that the winning consortia had not won blocks or
projects, but rather the right to negotiate an agreement to form
mixed companies to produce crude oil. He described the February 10
ceremony presided over by President Chavez as a "symbolic event"
and said that meeting the March 25 deadline for submission of the
mixed company agreement to the National Assembly would be "magic."
He noted that on Chevron's part, any agreement would have to be
approved by its Executive Committee and Board of Directors. Given
that its Board of Directors meets monthly, it would be unrealistic
for Chevron to approve a mixed company deal before March 25. Many
unresolved issues remain to be negotiated, including royalty and
tax rates, windfall profits taxes, shadow tax payments, etc. (see
Reftel). The GBRV wants the upgraders constructed in Soledad, but
Moshiri said that the geographic location of Soledad makes the
economics of the upgrader untenable. He noted that he has talked
to Chavez privately about this issue.



7. (C) To Bid or Not to Bid: Lohec described Chevron's basic
calculus on whether or not to bid on Carabobo as an assessment of
the likelihood of success in future negotiations with the GBRV.
Chevron believes "it has a strong hand to play to get to where we
need to be," said Lohec, a decision that other companies could not
make. He added that Chevron is confident it will successfully
negotiate favorable terms for the formation of a mixed company with
PDVSA. Lohec added that MENPET has already agreed to allow the new
mixed company to lift crude petroleum shipments as dividend
payments (a scheme Chevron has developed over the past year in its
mixed company operating PetroBoscan). He noted that due to the
phased payment plan for the bonuses, Chevron will only pay MENPET
$100 million upon signing the documents to form a mixed company and
that the other four installment payments are linked to project
milestones, effectively limiting risk exposure. Lohec underlined
that the GBRV needs Chevron's expertise because it "is headed down
a path that is disastrous for them." In the end, the Venezuelans
need to produce oil to generate revenue. Finally, Lohec noted that

CARACAS 00000193 003 OF 003


new projects in Iraq likely played into BP and Shell's calculus not
to bid in Venezuela. Since Chevron does not have any projects in
Iraq and is "already big in Venezuela," it decided to continue
forward here. Separately, Lohec told Petroleum AttachC) that BP and
Shell might decide to shut down operations in Venezuela - that it
all depends on whether limited operations here are profitable or
not and how long a timeline they are working with, noting that
Shell usually works with a 20-year timeframe. Lohec added as an
aside that Chevron continues negotiations to convert an exploration
and certification project in the Ayacucho 8 block of the Faja into
a production expansion adjacent to its current PetroPiar mixed
company. [NOTE: Ayacucho 8 does not appear on recent PDVSA maps.
END NOTE]



8. (C) Chevron's View on U.S.-Venezuelan Bilateral Relations:
Moshiri expressed surprise that the Ambassador did not receive an
invitation to the Carabobo announcement ceremony. [NOTE:
Ambassadors or other diplomats from the home countries of the other
winning oil companies attended the event. END NOTE] In his opening
remarks in the televised portion of the event, President Chavez
stated his desire to establish a dialogue with the U.S.
administration. On the margins of the event, he noted to Moshiri
his desire to see the Houston Astros play in Texas, but added that
political realities make a visit to the U.S. impossible. [NOTE: In
response, Moshiri offered a courtesy invitation for Chavez to visit
Chevron in Houston. END NOTE] Moshiri told the Ambassador that
Chevron would press the GBRV to extend an invitation to the
Ambassador to attend any future signing ceremony for the mixed
company deal. He also said he would raise the GBRV's failure to
invite the Ambassador to the Carabobo ceremony the next time he
spoke with Ambassador Alvarez. Moshiri noted, however, that he
believes that Alvarez now has less access to Chavez. Finally,
Moshiri said that Alvarez had made it clear that all decisions
regarding the bilateral relationship with the U.S. are elevated to
Chavez. The Ambassador underlined to Moshiri that the USG has made
every effort to re-establish a dialogue with the GBRV. In fact, he
said, the Embassy had been waiting for months for a response from
the GBRV to Diplomatic Notes responding to GBRV interest in a
dialogue on energy issues as well as the invitation from Energy
Secretary Chu to attend the April Energy and Climate Ministerial of
the Americas. Moshiri commented that Energy Minister Ramirez would
not take the risk of responding to these initiatives without a
decision from Chavez.



9. (C) Comment: The GBRV and media portrayals of the Carabobo
ceremony are misleading as no deals were signed. With the leverage
the international companies now have in negotiations with the GBRV,
we would not expect to see any deals signed by late March as the
companies will take the time they need to secure favorable terms.
A potential new Chevron deal would solidify its position as the
GBRV's largest and most important international partner. Repsol
has been a relatively minor partner with PDVSA and the Indian
companies are not currently involved in any projects in Venezuela.
Their lack of experience raises questions about the potential
success and ability to move project 1 forward. In the event that
new mixed companies are formed, it will be the first time the
Chavez administration and its Energy Ministry and PDVSA have
developed, executed, and operated a production project of this
magnitude. Many here are skeptical about their ability to do so.
In the past, Venezuela allowed the major international oil
companies to engineer, build, and operate the projects. Since
nationalization of the sector in 2007, PDVSA has failed to maintain
and or expand production. END COMMENT.
DUDDY

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