Chevron, Shell to sign agreements for oil, gas areas in Venezuela, sources say

The logo for Chevron appears above a trading post on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

Chevron is expected to sign agreements on Monday to participate in an extra heavy crude block in Venezuela’s main oil region, while returning a gas area that Shell is set to operate, three sources close to the preparations said.

The agreements are among the first big expansion deals since the U.S. launched a $100 billion reconstruction plan for Venezuela’s energy sector after capturing President Nicolas Maduro, and a sweeping reform of the country’s main oil law was approved in January, encouraging foreign investment.

The pacts, which would allow both companies to boost output in coveted regions but whose specific terms are unknown, are expected to be signed by the companies with the Oil Ministry and state-owned company PDVSA in the presence of acting President Delcy Rodriguez, the sources said on condition of anonymity.

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The companies could also reaffirm or change the terms of oil and gas areas they already operate in Venezuela, amid a review of contracts the ministry is conducting, a separate source said.

SHELL IN ADVANCED TALKS WITH CARACAS

Chevron and Venezuela’s Oil Ministry did not immediately reply to requests for comment. Shell declined to comment, but the energy major had previously told Reuters that the Loran gas area, explored by Chevron, was an attractive investment opportunity as it extends into its Manatee field in Trinidad and Tobago.

Shell has been in advanced talks with Venezuela’s government in recent weeks to develop oil and gas fields in the South American country, including Loran, sources said earlier this month.

Shell plans to drill subsea wells on the Loran side and tie them back to its Manatee platform in Trinidad, once it gets the rest of the field, a person with knowledge of the firm’s plans had told Reuters.

In March, Shell executives signed preliminary agreements with Rodriguez’s administration to advance the 4.2-trillion-cubic-foot Dragon gas project, the one for which it has done the most planning, and the Carito and Pirital onshore crude and gas areas.

Shell, which is developing Trinidad’s portion of the Loran-Manatee field, expects to send as much Venezuelan gas to Trinidad as possible for processing into liquefied natural gas, a big push for its shared Atlantic LNG project, which has been unable to reach capacity due to insufficient gas.

Chevron has been in parallel talks to relinquish Loran, where it had confirmed more than 7 TCF of reserves years ago, but did not develop. The U.S. major is now focused on expanding Petropiar, its main oil project in Venezuela, into the neighboring Ayacucho 8 area in the vast Orinoco Belt.

Chevron executives said in January the firm could increase output in Venezuela by about 50 per cent in the next two years within its existing footprint. The company’s joint ventures with PDVSA are producing 260,000 barrels per day of crude, about a fourth of the country’s total output.

(Reporting by Sheila Dang, Marianna Parraga, Deisy Buitrago and Curtis Williams; Editing by Julia Symmes Cobb, Paul Simao, Rod Nickel)