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Corocoro dispute may hurt Venezuela oil expansion

By Matthew Robinson | Reuters

Wed Jan 12, 2005 12:34 PM ET | CARACAS, Venezuela, Jan 12 (Reuters) - Venezuela's rejection of a plan by U.S. major ConocoPhillips(COP.N: Quote, Profile, Research) to develop the Corocoro oil deposit could scare off other investors and hurt the OPEC nation's aim to ramp up output in the coming years, industry experts said on Wednesday.

Development of the field, which ConocoPhillips was awarded in 1996, was to begin this year but work has been suspended after the government rejected the firm's development proposal due to low investment rates.

"The business plan presented by ConocoPhillips differs by more than $200 million from its original estimate," Venezuela's Energy Minister Rafael Ramirez said on Tuesday.

ConocoPhillips planned to begin producing around 70,000 barrels per day (bpd) of oil from the field beginning in 2006. Analysts say the project is still likely go forward but it was not clear how long it might be delayed.

Hitches in the development of Corocoro, considered one of Venezuela's most promising new fields, could impact plans by the world's No. 5 oil exporter to raise output up by around 2 million bpd by 2009.

"It works against it. Corocoro looked like something that we could count on," CreditSuisse First Boston analyst Jan Dehn told Reuters in a telephone interview.

ConocoPhillips officials would not comment.

Government officials say Venezuela's oil output is around 3 million bpd now. Many analysts peg production closer to 2.6 million bpd and say the government's 2009 expansion plan, which calls for more foreign output and investment, is unrealistic.


The dispute could also spook potential new investors in Venezuela's hydrocarbons industry, just as the South American oil exporter hopes to attract interest in new natural gas and oil tracts.

"Tension with a major oil partner is not good in a country as dependent on oil as Venezuela," Dehn said in a report.

The leftist government of President Hugo Chavez had already caused investor concerns last year by unilaterally raising taxes paid by large foreign-financed heavy oil projects.

Some local industry sources said it was unclear why the government had rejected ConocoPhillips' plan for Corocoro, as they would have been developed with state oil firm PDVSA.

It could be linked to an apparent hardline stance PDVSA has taken with international partners recently, including the rejection of 2005 operating budgets proposed by several foreign firms producing oil in Venezuela, local sources said.

Chavez, a tough-talking nationalist, has increased government control over the oil sector since he first won a 1998 election with a promise to use Venezuela's energy wealth to ease the plight of the poor.

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