VENEZUELA - Asphalt Alliance With Chevron.

In February 1996, then PDVSA unit Maraven and Chevron agreed to form a 20-year partnership (with an option for a 10-year extension ) to develop Venezuela's Boscan oilfield. This upstream venture now supplies heavy crude oil for Chevron's US operations.

As part of that deal, PdV M&M now has an interest in a US West Coast asphalt business called Chevron Ven Asphalt Alliance. It supplies crude feedstock to ChevronTexaco's refinery in Pascagoula (Mississippi) and asphalt plants at Perth Amboy (New Jersey), Portland (Oregon) and Richmond Beach (Washington).

The Latin American Operations: For years, PDVSA has been making efforts to buy into downstream ventures in Latin America. Unlike in the US, however, PDVSA had limited success in these areas, until populist President Ch vez came to power in early 1999. His vigorous nationalist drive has led to agreements for energy cross-investments with several Latin American states.

PdV M&M is aggressively pursuing Brazil's oil market, the biggest in Latin America, which consumes almost 2m b/d. CITGO International Latin America (CILA), its new unit, is negotiating exclusive gasoline distribution contracts with companies that have petrol stations in north-eastern Brazil, Puerto Rico and other Latin American countries. The stations will market Venezuelan oil products under the CITGO or PdV brands. The products will include diesel, heating oils, jet fuel, lubricants, waxes and asphalt.

An agreement with Brazil on June 29, 1999 called for PetroAmerica, a grandioze Chavez-proposed JV which he now says should lead to energy integration in the Latin American world. Further talks between President Chavez and his Brazilian counterpart Fernando Henrique Cardoso have focused on this project, which the Venezuelan president says should join the assets of Petrobras, PDVSA and several other Latin American NOCs.

Petrobras has already become an important client of PdV M&M for crudes, fuel oil and other products including LPG. During a visit to Caracas in April 2000, Brazilian President Fernando Henrique Cardoso also discussed Chavez proposal for a gas pipeline to northern Brazil to be built from Venezuela. Chavez also wants access to other Latin American markets for Venezuelan gas through Colombia's pipeline network. Brazil is the biggest market for natural gas in Latin America.

Chavez has discussed power inter-connections with Brazil, Mexico and Columbia. He has proposed a unified Latin American grid, including inter-connections with Cuba and the rest of the Spanish-speaking world on the American continent. He has proposed that PDVSA operate integrated energy ventures in Brazil in return for similar ventures in Venezuela for Petrobras.

A high-tension electricity pylon to carry power to energy-strapped Brazil, in a $400m project three years behind schedule and $85m over budget, was switched on in August 2001 by Chavez and Cardoso.

The 200 MW line stretches 680 km from Venezuela's Guri dam to Boa Vista in northern Brazil. It is a timely, if small, contribution to help ease Brazil's power shortage. But it has collided headlong with Venezuela's indigenous communities, mainly the Pemon group, and drawn sharp criticism of the state-owned power firm Edelca. These communities are threatening to disrupt the line, with more than 30 pylons having been knocked down during construction.

Energy integration of Venezuela and Brazil is difficult; their population centres are far apart. A $1.8 bn, 100,000 b/d JV with Petrobras in Pernambuco state (N-E Brazil) to process PDVSA crudes fell through in 1996 as both said it was not feasible. A plan for PDVSA and Petrobras to buy into the 210,000 b/d Aruba refinery of Coastal fell through in September 1997 as the Brazilian company decided to end the talks.

Monomeros Colombo-Venezolanos is a JV in Colombia to build an integrated downstream and marketing business. Colombian gas imports to the Lake Maracaibo region are to flow through a 140-mile pipeline from Colombia's La Guajira province.

The pipeline is to cost about $200m. The gas producer, ChevronTexaco, is involved in a joint study of the project. PdV Gas will import 200 MCF/day to help relieve a 600 MCF/ day deficit in the northern provinces. PdV M&M is selling gasolines to Ecopetrol of Colombia in a special deal - to curb contraband which involved about 7,000 b/d of Venezuelan mogas that used to enter the neighbouring country.