US embassy cable - 05CARACAS874

C O N F I D E N T I A L  CARACAS 000874 
 
SIPDIS 
 
 
NSC FOR CBARTON 
ENERGY FOR DPUMPHREY AND ALOCKWOOD 
TOKYO FOR SFLATT 
 
E.O. 12958: DECL: 03/22/2015 
TAGS: EPET, VE 
SUBJECT: NEW OFF-SHORE OIL & GAS ROUND IMMINENT 
 
Classified By: Economic Counselor Richard Sanders; for reasons 1.4 (b) 
and (d) 
 
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SUMMARY 
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1. (C) After more than a year of delays, it appears the GOV 
is ready to launch a new bid round for oil and gas 
exploration blocks in the Gulf of Venezuela and off Falcon 
state.  ChevronTexaco de Venezuela confirmed March 23 that it 
had received an invitation to an April 4 ceremony launching 
the round.  The Ministry of Energy and Petroleum (MEP) has 
approached the Embassy to confirm contact information for a 
number of U.S. independents.  The Chavez administration has 
not had much success running such rounds; thus, there will be 
a lot riding on this for Minister of Energy and Petroleum 
Rafael Ramirez_ and his team.  End Summary. 
 
2. (C) It appears that a long-awaited bid round for oil and 
gas exploration blocks located in the Gulf of Venezuela and 
off Falcon state may finally be imminent.  The GOV has said 
publicly for more than a year that the round would be held 
shortly.  Most recently, Energy Minister Ramirez_ said it 
would be launched on March 28.  In an interesting commentary 
on President Hugo Chavez's involvement in such details, an 
Energy Ministry staffer informed a Commercial Section FSN on 
March 21 that the launch had been delayed once again because 
Chavez had instructed the Ministry to doublecheck company 
contact information. 
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U.S. INVITEES 
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3. (U) The Ministry of Energy and Petroleum (MEP) contacted 
the Embassy Commercial Section March 21 to verify contact 
information for a number of U.S. independents including: 
Anadarko, Apache, Devon Energy, El Paso, and Occidental 
Petroleum Co.  Texas International Petroleum, which we 
believe may be a new start-up, was also mentioned by the 
Ministry staffer.  ChevronTexaco de Venezuela subsequently 
confirmed to econoff March 23 that it had received an 
invitation to attend an April 4 ceremony launching the round. 
 
 
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BIDDING ON WHAT? 
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4. (C) Hard information on what the round will consist of has 
been impossible to obtain so far.  Although the press is 
discussing the possible auction of 32 off-shore blocks, we 
believe this may be the beginning of a multi-tranche process. 
 PDVSA Vice President for Exploration and Production Luis 
Vierma told econoff February 3 that the round will focus on 
950 square kilometer blocks in the Gulf of Venezuela and off 
Falcon state.  (Note:  In February 2004, PDVSA announced that 
these tracts could hold as much as 18 billion barrels of oil 
and 100 trillion cubic feet of natural gas.)  He emphasized 
that the blocks in the Gulf of Venezuela will not include any 
areas contested by Colombia.  Vierma said the MEP was 
considering a multi-tranche approach, i.e., offering 6-7 
blocks in a first round and following it up a month or two 
later with a second round. 
 
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THIRD BID ROUND UNDER CHAVEZ 
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5. (C) The Chavez administration's experience with bid rounds 
has been somewhat less than fully successful.  An auction of 
on-shore gas blocks in June 2001 met with a lukewarm response 
while the December 2002 offering of four blocks in the 
off-shore Deltana Platform natural gas project resulted in 
three bids on two blocks.  While this result could be 
explained by the effects of the December 2002 national 
strike, a subsequent effort in September 2003 to re-bid 
Blocks 3 and 5 of the Deltana Platform yielded one bid on 
Block 3 by ChevronTexaco.  While there has been most emphasis 
on the possibility of natural gas in the Gulf of Venezuela 
 
and Falcon blocks, it is clear that exploration could also 
yield oil or condensates.  Such a discovery would shift the 
legal status of the block out of the purview of the more 
flexible Gaseous Hydrocarbons Law to the 2001 Hydrocarbons 
Law.  No deals have yet been negotiated by the Chavez 
government under this law. 
 
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COMMENT 
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6. (C) The Ministry staffer who contacted the Commercial 
Section slipped and included the name of an Indian oil 
company in the list she gave the FSN.  It appears that the 
invitation list is a long one that will include many 
companies from countries that have now been annointed by 
President Chavez as Venezuela's favored partners. So far, 
with the exception of ChevronTexaco, we have not been able to 
verify that any other U.S. company has received an 
invitation.  Given the delays that have attended Chavez 
Adminstration efforts to get this process off the ground and 
the relative lack of success of earlier rounds, there will 
doubtless be a lot riding on this for Minister of Energy and 
Petroleum Rafael Ramirez_ and his team.  High expections of 
the yield of this round, coupled with the current high oil 
price environment, may lead the GOV to drive hard bargains, 
imposing onerous national partnership or content requirements. 
Brownfield 
 
 
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      2005CARACA00874 - CONFIDENTIAL