New consortiums aim to double production by 2016, even in an environment favoring lower-carbon options.
Venezuela's heavy oil is one of the world's largest hydrocarbon resources, and is relatively undeveloped. On Feb. 10, the government announced the results of the first oil auction held since President Hugo Chavez took office in 1998; it comprised three blocks in the Carabobo field of the Orinoco belt:
Carabobo 1 was awarded to a consortium involving state oil company PDVSA (60%), Spanish Repsol (11%), Malaysian Petronas (11%), and India's ONGC (11%), Indian Oil and Oil India Ltd (7% together).
Carabobo 3 was awarded to a consortium including PDVSA (60%), U.S.-based Chevron ( CVX - news - people ) (34%) and Japanese Mitsubishi, Inpex, Japan Oil and Gas, and Japan Metals National (5%).
--Carabobo 2 was not awarded.
Details have yet to emerge, but it appears each of these consortia will be investing some $15 billion, large commitments even by oil industry standards. If these investments are added to what might be invested in the separately negotiated Junin blocks, total new investment in heavy oil projects could exceed $75 billion. Each of these consortia is likely to have to spend $6 billion to $8 billion on specialized refineries to upgrade the heavy oil to marketable specification and quality. The Venezuelan government showed it was prepared to sweeten the deals in some respects--lowering royalty levels and lifting some taxes--but maintained PDVSA as the dominant majority shareholder in each case.
--Doubling production. The government has stated that this suite of projects will increase the country's oil production from 3 million to 6 million barrels per day (b/d) by 2016, with first oil being delivered by 2013, an aggressive pace.
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