Venezuela awards Orinoco Belt blocks

CARACAS, Venezuela, Feb. 12 (UPI) -- Venezuela on Wednesday awarded oil blocks in its massive Orinoco Belt to two groups led by Chevron and Spain's Repsol YPF, signaling a turnaround by President Hugo Chavez, who nationalized the energy sector in 2007.

It was the first oil auction since Chavez took office 11 years ago.

Chevron, Mitsubishi Corp., Inpex Corp. and Suelopetrol CA will take a combined 40 percent stake in the Carabobo 3 area, said Oil Minister Rafael Ramirez.

State-run Petroleos de Venezuela SA will hold 60 percent. Output is to start in 2013 and rise to 400,000 barrels a day in 2016, Ramirez said.

Repsol, Oil & Natural Gas Corp., Petroliam Nasional Bhd., Indian Oil Corp. and Oil India Ltd. will develop the second project called Carabobo 1 with PDVSA to pump 480,000 barrels a day.

The groups led by Chevron and Repsol agreed to pay signing fees of about $500 million and $1 billion, respectively, as part of their bids.

A contract for a third area in the Orinoco Belt was not assigned, reflecting the reluctance of other oil companies to take part in the auction. Royal Dutch/Shell, Brazil's Petrobras and Total of France were among foreign companies that had shown initial interest, The New York Times said.

In a report last month, the U.S. Geological Survey said the Orinoco Belt was the largest petroleum accumulation it had assessed, with an estimated 513 billion barrels of recoverable crude.

"We have put the Orinoco Belt at the world's disposition," said Chavez in the announcement. "Foreign oil investment is absolutely necessary to develop our reserves. We can't do it alone."

Venezuela's economic and energy landscape has shifted since Chavez rose to power 11 years ago. While the country has a stronger dependence on oil, it is experiencing intensifying electricity blackouts. Faced with declining oil revenues since 2008, the president was forced last month to devalue his country's currency.

On top of that, the country is facing an inflation of 27 percent, the highest in Latin America.

"It's not that Chavez is suddenly embracing a market system or respect for property," Roger Tissot, an expert on Venezuela's energy industry at Gas Energy, a Brazilian consulting firm specializing in Latin America told the Times. "He's like a chameleon who can change his stripes when he realizes Venezuela's long-term economic survival is at stake."

But in his speech Wednesday to senior executives involved in the auction, Chavez said, "You have all the guarantees for your investments, your profits, and the capital that you want to repatriate," Oil and Gas Journal reports.

Venezuela, a founding member of OPEC, is the world's fifth-leading oil exporter and the fourth-leading supplier of crude to the United States.