Venezuela and the Italian oil company Eni have agreed to spend $10 billion to develop a large oil field in the prolific Orinoco Belt, site of Venezuela’s heavy oil deposits.
The joint-venture agreement, which was signed Friday in Caracas, comes a week after Eni and Venezuela’s oil company, Petróleos de Venezuela, known as Pdvsa, ended their disagreement over the 2006 nationalization of another oil field called Dación. The Italian company agreed to $700 million compensation, a much lower figure than it had originally sought.
The deal shows that despite a strongly nationalistic approach to its energy resources, Venezuela’s government is able to attract foreign investors to develop its large deposits of heavy oil.
For the last two years, Venezuela’s government has sought to gain a majority stake in its oil ventures with international companies. Most have agreed to the government’s new terms, becoming minority partners and paying higher taxes, recognizing that they have few alternatives.
One company, Exxon Mobil, has adopted the most aggressive approach, opting to shut down much of its operations last year, and seeking higher compensation from the government. Exxon recently won a court order freezing up to $12 billion in Venezuelan assets.
For Eni, the agreement is a small coup that allows it to enter a country with vast unconventional oil reserves. The Orinoco Belt is estimated to hold about 240 billion barrels of extractable heavy oil, nearly as much as Saudi Arabia’s proven deposits. The oil from the Orinoco, however, is more costly to extract than conventional oil and is harder to refine.
The Italian company will invest $4 billion in the joint project; $6 billion will come from Pdvsa.
“I have always felt it was important for us to be there,” Paolo Scaroni, Eni’s chief executive, said before the agreement was signed.
The field, Junin Block 5, is about 340 miles southeast of Caracas. According to Eni, it has already been tested by “several wells” and has a resource potential equivalent to more than 2.5 billion barrels of oil. Oil production from the field is eventually expected to reach 300,000 barrels a day.
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