VENEZUELA - Petrozuata-II.

Petrozuata has been considering a project to raise its capacity to 260,000-290,000 b/d and a second upgrader to be on stream by 2008/09. This is one of several ventures Caracas has been proposing to bring total Orinoco production above 1m b/d by end-2009.

ConocoPhillips, however, is taking its time on this in view of insistence by Caracas for PDVSA to assume control over E&P ventures and its rising royalty and tax rates. The US major, like most other IOCs, is still waiting to see whether world oil prices will continue to be above $50/barrel in the coming years, although Petrozuata and the other three Orinoco-based SAs have been quite profitable in the past two years. The average cost of producing 22[degrees] APS oil in Venezuela is still less than $14/barrel, as in the case of producing synthetic crudes out of tar sands in Canada.