UPDATE 2-Venezuela gives Chevron natgas extraction go-ahead

Thu Apr 8, 2010 2:05pm EDT

* Chevron and PDVSA to exploit 7-tcf project

* Joint venture still needs to be formed

* Caracas says first production expected by 2013 (Recasts, adds details, background throughout)

By Eyanir Chinea and Marianna Parraga

CARACAS, April 8 (Reuters) - Venezuela gave Chevron the go-ahead on Thursday to extract natural gas from a 7 trillion cubic feet field off the Orinoco delta, the closest any company has come to producing offshore gas in the OPEC nation.

The government said Chevron and PDVSA Gas, a unit of the state oil company, had found enough gas to extract from the Plataforma Deltana field since an exploration deal was signed in 2003. It said the first production was expected by 2013.

"The reserves of gaseous hydrocarbons found in Block II of Plataforma Deltana are principally made up of non-associated natural gas hydrocarbons and the volume is sufficient to guarantee the economic exploitation of the resources," it said in a statement published in the Official Gazette.

For years, Venezuela has talked about exploiting its large offshore gas reserves, but has yet to extract anything. Chevron, which is also exploring Block III, still needs to form a joint-venture with PDVSA.

Norway's StatoilHydro (STL.OL) and France's Total (TOTF.PA) have explored Block IV in the Plataform Deltana project -- one of the largest offshore gas sites in the Latin American nation -- but they have not yet announced any discoveries.

Exploration in Block II was completed in 2007, but production was not approved until now because PDVSA wanted to be the majority stakeholder. It achieved that in October, 2009, by buying Conoco Phillips' stake and raising its own share in the block to 61 percent. Chevron owns the other 39 percent.

Pressed by an electricity crisis, Caracas is again seeking foreign partners to help it exploit its offshore 14.7 trillion cubic feet Mariscal Sucre gas project, a government source told Reuters last week. [ID:nN26194125]

POWER SHORTAGES

A severe drought has caused power shortages and outages in much of Venezuela, which relies heavily on hydroelectric dams and is scrambling to boost gas- and diesel-fueled generation.

Speeding development of Sucre and other Venezuelan gas fields would provide gas for turbines and save the country billions of dollars in diesel fuel for its thermal generators.

Last year, PDVSA invited a group of companies to take part in Mariscal Sucre. Those invited included Japan's Marubeni (8002.T), Mitsui (8031.T), Mitsubishi (4182.T) and Itochu (8001.T), Statoil (STL.OL), Russia's Gazprom (GAZP.MM) and Italy's ENI (ENI.MI).

In January, the government changed the conditions it was offering the private companies, but failed to attract any bids and the auction was closed.

Earlier talks with Shell (RDSa.L), Exxon Mobil (XOM.N), Mitsubishi and Petrobras (PETR4.SA) fell through.

Venezuela sometimes imports gas from neighboring Colombia. In Oct. 2007, Venezuelan President Hugo Chavez and his Colombian counterpart Alvaro Uribe opened a 500 million cubic feet per day pipeline operated by Chevron.

In recent years, it has sent as much as 300 million cubic fet per day of gas to Venezuela, although that petered out this year as relations between the two countries have deteriorated. (Writing by Charlie Devereux; Editing by Daniel Wallis and David Gregorio)

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