Venezuela approves incentives for Russia's Rosneft to invest in offshore gas

CARACAS (Reuters) - Venezuela has modified a cooperation agreement with Russia to include incentives for oil company Rosneft to develop two offshore natural gas fields, according to a decree published in the South American country’s official gazette.

The decree, dated Oct. 29 but circulated on Wednesday, calls for the creation of "favorable conditions for the execution of development projects in the Patao and Mejillones fields," two gas concessions off Venezuela's eastern coast granted here to the Russian state company in 2017.

The move comes as Rosneft has become a key ally for Venezuelan state oil company PDVSA in the face of U.S. sanctions on the company, part of Washington’s efforts to force out socialist President Nicolas Maduro, who has overseen an economic collapse and is accused of corruption and rights violations.

Maduro blames the U.S. sanctions for the country’s woes.

In October, Rosneft took 62% of Venezuela’s total oil exports of 812,775 barrels-per-day, according to documents and data, selling most of it on to refineries in India and China. That helped PDVSA drain an inventory buildup that had forced it to cut output, given a lack of willing buyers due to sanctions.

But the company has not made big investments in the gas fields since receiving the concessions. The incentives include an exemption for value-added tax and import taxes for Rosneft’s development of the two fields, according to Jesus Farias, a member of the pro-Maduro National Constituent Assembly.

There is not yet sufficient infrastructure to make production at Patao or Mejillones viable, said Antero Alvarado, Venezuela director at consultancy Gas Energy Latin America. For example, there are no pipelines to bring the gas to shore in Venezuela or to neighboring Trinidad and Tobago, where trains to make liquefied natural gas have significant spare capacity.

“For that to occur many things would still have to happen,” Alvarado said. “The incentives are not very clear.”

Rosneft has been a major lender and investor in Venezuela’s oil sector. Venezuela has been paying off the loans at a brisk pace this year, and Rosneft said on Wednesday that PDVSA’s outstanding debt had fallen to $800 million by the end of the third quarter, down from $1.1 billion in the second quarter.

But it was unclear how much more the company is willing to invest: it has poured around $9 billion into projects in the country since 2010 but has yet to break even, according to Reuters calculations.

Reporting by Luc Cohen and Mayela Armas; Editing by Bernadette Baum