Total S.A (NYSE:TOT)
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3 Anos : February 2009 para February 2012
France's Total SA (TOT) and state oil giant China National Petroleum Corp. now plan to bid for two oil large blocks being auctioned in Venezuela, instead of one they'd previously shown interest in, two people involved in the bidding round said.
"Total and CNPC are now bidding for two heavy oil blocks, and their bid includes building upgrading facilities to process the oil," one of the people said.
The near failure of Iraq's licensing round this week, when just one of six blocks being bid for was awarded, may well be a factor being taken into consideration by the 19 foreign companies showing interest in Venezuelan concessions when they make final adjustments to their offers.
Coincidentally CNPC, in partnership with BP PLC (BP.LN), won the contract for Iraq's Rumaila oil field - Iraq's largest oil field and one of the world's biggest.
A successful auction in Venezuela would allow Caracas to develop oil reserves it can't afford to on its own by using funds from foreign companies, and help it trim dependency on the U.S. as the main buyer of its oil.
The people put the cost of developing just one of the two blocks the Sino-French group is looking at, plus building a processing unit to clean up the sludge-like oil from it, at $7 billion-$10 billion - or more.
It isn't clear how much more it would cost if oil from both blocks needed to be fed through separate upgraders, or if this is being considered by Total and CNPC.
The blocks, in the Carabobo region of the country's rich Orinoco oil belt, are among seven being offered by Venezuela. They government says they hold 272 billion barrels of recoverable reserves combined.
Oil minister Rafael Ramirez has said sealed bids must be handed in by July 28, and that the results would be announced on August 14.
Under the rules, state-owned Petroleos de Venezuela SA will retain at least 60% of each block. Bidders need to pay Venezuela's government an upfront bonus based on expected future output, and explain their oil distribution plan.
The bonus is based on a standard levy of 50 cents a barrel a day of any oil produced over the 25 years of the concession, one person said.
In the case of the Total-CNPC bids, if successful, Total will be the operator and responsible for upgrader building, given its specialization in that area.
Total has experience with advanced refining technology needed to remove sand, water, salt and other contaminants from heavy oil and to turn it into higher quality crude.
Under an earlier Total-CNPC plan to bid for one block, revealed by Dow Jones Newswires in March, CNPC's share of the oil produced would be shipped to China for further processing in a CNPC-PdVSA joint-venture 400,000 barrel-a-day refinery in Guangdong, southern China, able to process high-sulfur Venezuelan crude.
It isn't clear what Total would do with its share, but selling it in the open market isn't an option.
In October last year, in giving details of the auction process, Ramirez said: "We want to know where that crude would be going, what markets and what refineries...we don't expect this output to be sold in the spot market."
A CNPC spokesman Friday said he had no information on the matter.
A spokesman for Total in Paris declined to comment. In May, Total Chief Financial Officer Patrick de la Chevardiere confirmed that Total is in talks with CNPC on the possibility of working together in a Venezuela project.
The names of the companies doing diligence on the Venezuela blocks reads like a who's who of the oil and gas industry.
Among them are Rosneft (ROSN.RS), TNK-BP Holding (TNBP.RS), Petroleo Brasileiro SA (PBR), Royal Dutch Shell (RDSB.LN), StatoilHydro (STO), BP PLC (BP), Chevron Corp. (CVX), Repsol YPF SA (REP), India's Oil & Natural Gas Corp. (500312.BY) and companies from Japan, Portugal, Colombia and Malaysia.
One notable exception is Exxon Mobil Corp. (XOM), which is in a compensation dispute with Venezuela over a nationalized heavy oil venture.
By Simon Hall and Wan Xu, Dow Jones Newswires; +86-106566 5848; simon.hall@dowjones.com
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