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Reactivation of the Carabobo Project - International Law Office

International Law Office

Energy & Natural Resources - Venezuela

Reactivation of the Carabobo Project

November 09 2009

Scope of Project
Impact on Foreign Oil Companies


On September 30 2009 companies that are participating in the Carabobo Project bidding procedure (a project that involves upstream activities in the Orinoco Basin to produce extra heavy crude and its transport and upgrading) were invited to attend a meeting with the Ministry of the Popular Power for Energy and Petroleum. The purpose of the meeting was to reactivate the project, which was put on hold in June 2009. A new schedule was announced indicating that the final terms and conditions will be distributed on November 12 2009 and offers will be presented on January 28 2010.

Scope of Project

The project involves the creation of three mixed companies to carry out upstream activities in the Orinoco Oil Basin where reserves have been certified and extra heavy crude activities have been upgraded to permit the export of lighter crudes. In December 2008 19 companies bought the data pack, but in June 2009 the project was suspended, allegedly due to the difficult economic situation and the fact that the companies had objected to certain conditions of the project, which made it difficult to proceed with a successful bidding round.

At present, the following companies are participating in the Carabobo Project bidding procedure:

  • BP;
  • Chevron Global Technology Services Co;
  • China National Petroleum Corporation;
  • Eni Venezuela BV;
  • Galp Energía SGPS SA;
  • Inpex Corporation (formerly Teikoku);
  • Japan Oil Gas Metals National Corporation;
  • JOGMEC;
  • Mitsubishi Corporation;
  • ONGC Videsh Limited;
  • Petrobras Participaciones SL;
  • PC Venezuela Ltd;
  • Repsol;
  • Shell Venezuela SA;
  • Sinopec International Petroleum Exploration and Production Corporation;
  • StatoilHydro;
  • Suelopetrol;
  • Total; and
  • a Russian consortium comprising Rosneft, Gazprom, Lukoil, TNK-BP and Surgutneftegaz.

In September 2009 the project was reactivated and several concerns stated by the participating companies will be addressed in the revised terms and conditions to be issued on November 12 2009.

Impact on Foreign Oil Companies

This is the first bidding process to be launched after the enactment of the Organic Hydrocarbons Law in January 2002. All other existing projects were established under the previous legislation (the Organic Law that Reserved to the State the Industry and Commerce of Hydrocarbons) and migrated to mixed company structures as required by the Organic Hydrocarbons Law. The Organic Hydrocarbons Law requires that upstream activities be carried out through mixed companies where CVP or PDVSA will hold more than 50% of the corporate capital. In this case, CVP has indicated that it will hold 60% of the corporate capital. This creates a series of complex situations because the incorporated entity structure limits the flexibility of the participating entities with respect to timing investment decisions, corporate governance as minority shareholders and the operating capacity of state-owned companies.

For further information on this topic please contact Vera de Gyarfas at Travieso Evans Arria Rengel & Paz by telephone (+58 212 918 3333), fax (+58 212 918 3334) or email (vbg@traviesoevans.com).


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