Venezuela to ok major oil deals under Chavez, ONGC in fray

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Venezuela was to award the largest oil investment of President Hugo Chavez's 11-year rule on Wednesday, drawing tens of billions of dollars of much-needed foreign finance to the Orinoco Belt just three years after the leftist leader nationalized operations there.

Groups led by US - based Chevron and Spain's Repsol looked set to win the contest to tap into the OPEC member's 100-plus billion barrels of reserves. Oil giants are eager to replenish waning reserves.

Caracas even softened some of its fiscal terms. Falling oil prices have forced Venezuela and other producer nations to seek partnerships from companies they marginalized during a five-year commodities boom.

An official from Repsol said a consortium it belonged to had won Project 1 of the bid. Repsol will take 11% in the project, the same stake as consortium partners Petronas of Malaysia and ONGC of India.

Chevron, Venezuela's Suelopetrol and Japanese companies Mitsubishi, Jogmec, Inpex won Project 3, a source from that consortium told Reuters.

This would leave a third block open, which Venezuela could assign directly to another interested company.

The official results are to be announced later on Wednesday in a ceremony to include Chavez.

"It's extremely hard not to see this as a success, especially given the level of risk aversion and the complete lack of private investment in the oil industry in more than a decade," said Eurasia Group analyst Patrick Esteruelas.

Venezuela's Carabobo oil tender includes three projects slated to produce 1.2 million barrels per day following years of slumping oil production in the OPEC nation, though the new facilities may not do much to increase the country's total exports due to declining output at older fields.

The auction's winners will have a major opportunity to gain access the Orinoco region, which the US Geological Survey recently called one of the world's largest crude reserves.

"The Orinoco is Venezuela's oil future, and therefore the country's economic future," said Roger Tissot, consultant with Gas Energy Latin America.

"If PDVSA would have had the money to do everything alone, they would have tried to do so - but they cannot. They have financial and also I would guess human resources limitations."

Venezuela holds the world's fifth-largest oil reserves at an estimated 100 billion barrels, according to the BP Statistical Review. The Venezuelan government says it holds at least 177 billion barrels that could yet be produced.

Project risks

The companies face a host of risks including a major financing burden, a massive infrastructure buildout in isolated areas that in some cases have no roads, and the risk that Chavez could launch another wave of state takeovers.

The leftist leader in 2007 took over operations of four Orinoco projects run by private oil companies, leading US giants Exxon Mobil and ConocoPhillips to leave the country and sue for compensation.

Industry sources said the government did not receive bids from several companies Chavez has openly courted. They include China's CNPC; Russian firms such as Lukoil and Gazprom; and Shell, which has proprietary technology for heavy oil production.

This is likely due in part to Venezuela running a parallel process of direct adjudication for blocks in the Junin area of the Orinoco belt that boasts solid reserves but is considered a less attractive production area.

Venezuela offered Junin blocks to Italy's Eni, CNPC and a consortium of Russian companies including Lukoil - possibly explaining why these companies did not put in offers for Carabobo fields - who each agreed to invest close to USD 20 billion dollars to develop projects in the area.