VENEZUELA - Gas Exports.

Caracas in June 2002 reached a long-awaited agreement with Shell and Mitsubishi Corp. of Japan to undertake an integrated $3 bn project to develop 10 TCF of non-associated gas from North of Paria offshore fields and have a 4.7m t/y LNG plant and terminal for export. Some of the gas will be used by the domestic market. First gas supplies are expected to hit the market in 2007.

The LNG project, from which ExxonMobil has been excluded, forms part of a strategy to broaden Venezuela's oil-based economy by tapping into its gas reserves. PDVSA will have a 60% stake in the Mariscal Sucre JV. Shell will hold 30% and Mitsubishi 8%. The remaining 2% will be offered to private investors. PDVSA plans to offer up to 4% of its own stake to Qatar Petroleum in the future.

The partners still need to negotiate other details, including commercial terms before signing the final JV agreement before end-2003. The agreement signed in 2002 calls for exploration work around the existing fields in Paria in the search for more gas reserves.

Construction of the LNG plant, to be located in the eastern state of Sucre, will begin in 2005 with start-up expected in 2007.

There could be several other LNG export ventures in Venezuela, mainly in the Deltana Platform offshore area partly shared with neighbouring Trinidad & Tobago (T&T). Agreements on joint exploitation of the shared areas and on the proposed processing of Venezuelan gas in T&T have been signed by the energy ministers of the two states.

It is mainly in view of this area's big gas potential and US-bound LNG export projects that ChevronTexaco and ConocoPhillips agreed ealier in 2003 to jointly explore and develop a Deltana field on Block 2. ConocoPhillips acquired 40% in this. ChevronTexaco hept the remaining 60% of the venture and will be the operator of the block. PDVSA has the right to acquire 35% the moment the project turns commercial.

George Kirkland, president of ChevronTexaco Overseas Petroleum, said at the JV signing ceremony: "This project is part of ChevronTexaco's strategic plans to commercialise its existing natural gas resource base and enable the creation and development of new natural gas growth opportunities worldwide".

Caracas says the Deltana Platform has 40 TCF of recoverable gas reserves, which could bring $4 bn in foreign investment to Venezuela in six years. Block 2 is said to contain 30-38 TCF TCF. Both US majors have said the gas from Block 2 will be processed into LNG and exported to the US.

Venezuelan Energy Minister Ramirez says: "The gas from Deltana will feed demand from consumers on the US West Coast, where a deficit of energy is expected to occur". Ramirez says Caracas will to award two other Deltana tracts - Blocks 3 and 5 - to foreign companies by end-2003. Caracas will also award several gas-rich blocks in other areas. The Ministry of Energy and Mines, now in charge of awarding E&P blocks, says around 22 companies have expressed interest in Blocks 3 and 5, including ExxonMobil, ChevronTexaco, ConocoPhillips, LUKoil of Russia and Statoil of Norway.

Deltana Block 4 was won last February by the tate-controlled Statoil. Leading its own 4.1m t/y LNG venture on the Norwegian side of the Barents Sea worth about $6.3 bn, called Snohvit to be on stream in 2006, Statoil is developing a global business in liquefied natural gas. It will take a major part of Snohvit's output to the US, where it will invest in a sales network and market development.

Statoil, having grown rapidly as an integrated business since the late 1970s, hopes that its Deltana operation will eventually lead to a venture to export LNG to the US. The company will begin exploration drilling on Block 4 in 2004.

T&T already has one of the most successful LNG ventures in the Atlantic basin. President Ch vez, who visited Trinidad in August 2003, has said early Venezuelan gas production could be shipped to T&T for processing and LNG export until the country's 4.7m t/y LNG plant is completed.

Ali Moshiri, president of ChevronTexaco Latin America Upstream, told a Washington forum in July 2003: "Venezuela with its gas resources and proximity to the United States, has a great opportunity to deliver LNG to help solve the expected supply problem. Moving LNG into the United States will likely be limited to those that can access new re-gasification terminals like ChevronTexaco's Port Pelican project".

Ali Rodriguez, PDVSA's president, told the same forum his company was keen on development of Deltana gas for LNG exports, adding: "PDVSA is ready to go forward with the Deltana gas...project with the help of national and international companies". Deputy Energy Minister Luis Vierma told the meeting by 2008 Venezuela could produce 2 BCF/d of gas for US markets, delivered by tanker as super-cooled LNG.