A recently published law approves the treaty executed between Venezuela and China on cooperation for long-term financing. The treaty establishes that representatives from China will grant a line of credit to Venezuela to a maximum of $10 billion and Rmb70 billion. The Venezuelan representatives will pay for the line of credit through the sale of crude.
Only two consortia presented offers to participate in the incorporation of mixed companies that will develop the fields subject to the Carabobo Project bidding process. As such, the consortia were awarded the blocks for which they bid. The process has progressed rapidly and the National Assembly recently approved the incorporation of two mixed companies and established the main conditions for their incorporation.
The government has announced that the national interconnected power system is beyond its capacity and certain measures must be imposed in order to reduce power use. The measures include a compulsory 20% power reduction, regulated opening and working hours, scheduled electricity cuts and a ban on the use of incandescent or halogen lamps and light bulbs in advertisements.
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 recently 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.
The new Organic Law for the Development of Petrochemical Activities was published recently. The law imposes important restrictions on a sector that until now was fully open to foreign or national private investment. As a result of the law, new projects in this area cannot be carried out by entities that are not mixed companies with a state participation of at least 50%.
The organic law that reserves to the state the goods and services linked with hydrocarbon primary activities recently entered into force. As a result, the assets and services of oil service contractors that are required to carry out primary activities will be owned or carried out only by the state, PDVSA and its affiliates, and mixed companies controlled by the state. The possible impact of this law on private companies could be significant.
PDVSA plans to merge the 21 mixed companies that migrated from operating services agreements in 2006 into six large mixed companies in order to reduce operating costs. It has also announced the purchase of the first tanker for the Cuban-Venezuelan oil fleet company Transportes del Alba, which will be used to supply the Petrocaribe countries.
The Ministry of Popular Power for Energy and Petroleum recently announced the commencement of the selection process for partners to form mixed companies that will operate the Carabobo field in the Orinoco Oil Basin. This is the first time that foreign companies have voluntarily decided to incorporate mixed companies with PDVSA/CVP.
The Liquid Fuel Internal Market Reorganization Organic Law was recently published in the Official Gazette. One purpose of the law is to reserve to the state the activity of intermediation for the supply of liquid fuels between the state-owned company PDVSA and its affiliates (which sell the fuels) and gasoline stations (which buy the fuels).
On April 15 2008 the Venezuelan National Assembly issued a law which created a special contribution to be paid by all exporters of crude, upgraded crude and derivatives in the event that the average monthly price of Brent crude exceeded $70 per barrel. The Ministry of the Popular Power for Energy and Petroleum recently issued a resolution modifying the basis for calculating this special contribution.
The National Assembly recently issued a new law which calls for a special contribution to be paid by all exporters of crude, upgraded crude and derivatives in the event that the average monthly price of Brent crude exceeds $70 per barrel. The greatest impact of this new law is on PDVSA and its affiliates.
ONGC Videsh Ltd has been directly awarded the right to incorporate the mixed company Petrolera Indovenezolana SA with Corporación Venezolana de Petróleo, pursuant to a resolution of the Ministry of the Popular Power for Energy and Petroleum. This is one of a number of recent developments in the energy sector.
Venezuela continues the process of migration of unincorporated joint ventures to mixed companies (where the state holds more than 60% participation) for the production of extra-heavy crude in the Orinoco Basin. A number of these developments have recently been published in the Official Gazette.
Petrodelta SA (a mixed company to be incorporated by CVP and Harvest-Vinccler) was recently granted four additional blocks in which to carry out exploration and exploitation of hydrocarbon activity. This is the first of a number of recent developments in the Venezuelan energy sector.
Recently President Chávez and the president of Iran, Mahmoud Ahmadinejad, launched the establishment of a mixed company in the petrochemical area of the Pars del Sur Petrochemical Complex, Assaluyeh, as part of one of 17 agreements signed between the two countries during President Chávez's tour of Iran.
The deadline for the migration of association agreements in the Orinoco Belt and profit-sharing agreements into mixed companies expired at the end of June 2007, with two major oil companies failing to meet the deadline. However, seven oil companies have agreed to migrate into mixed company structures, with the exact stock distribution percentages yet to be confirmed.
The Treaty for the Creation of an Organization of South American Gas-Producing and Exporting Countries has been published in the Venezuela Official Gazette. The treaty, which has been signed by Venezuela, Argentina and Bolivia, establishes the intention of the parties to cooperate in developing gas-related infrastructure and technology.
In March 2007 Petróleos de Venezuela SA authorized the issue of $7.5 billion in bonds which mature in 2017, 2027 and 2037. In addition, oil companies Total and BP have reached an agreement with the Venezuelan government to relinquish their claims in the Jusepin field in exchange for a payment of $250 million.
The government recently enacted the Migration Law, which provides that the strategic associations, the operations established by profit-sharing agreements and the Orimulsion project must migrate into mixed company structures under the Organic Hydrocarbons Law.
Following the migration of operating agreements (contracts entered into between oil companies and Petróleos de Venezuela SA (PDVSA) affiliates for the operation of marginal oil fields) to mixed company structures, the government has now decided to migrate strategic associations agreements (joint ventures between oil companies and PDVSA affiliates which hold 'golden shares' but a minority shareholding).