Venezuela plans to boost oil output at least 12 percent in a joint venture with foreign investors that will cost more than twice what the government previously estimated, a confidential document shows. The project would increase Venezuela's daily output of 3 million barrels a day by 400,000 barrels a day within seven years, according to the document, which was obtained by Bloomberg News. The project would cost $18.4 billion, the report says, up from Energy and Oil Minister Rafael Ramirez's June estimate of $8 billion.
The new estimate follows a 76 percent drop in oil prices from record highs in July and decisions by companies to delay exploration and drilling efforts from Canada to Kuwait amid the global credit squeeze. State-owned Petroleos de Venezuela SA wants the project and two others in the Orinoco oil belt to be the government's first ventures with outsiders since President Hugo Chavez nationalized crude assets in 2007.
"It will be very tricky for companies, big or small, to get that level of funding," said David Thomson, a Latin America energy analyst for Wood Mackenzie in Edinburgh. "Even if there wasn't a credit crunch on, raising $10 billion to $20 billion for Venezuela wouldn't be the easiest."
Given past nationalization moves by Chavez, a self-avowed revolutionary socialist, Thomson said, "Banks aren't going to touch it with a bargepole."
Energy Ministry
The document, marked confidential, was posted on and later removed from a Web site, fajadelorinoco.com, that the government uses to provide information to possible partners. Dated Feb. 6, it is described as a preliminary development plan for the last of three Orinoco projects announced by Ramirez in June.
Eulogio del Pino, president of Corp. Venezolana de Petroleo, said in a text message that the document is authentic. His company is a unit of Petroleos de Venezuela, also known as PDVSA.
The costs include $4.41 billion for drilling, $2.2 billion for steam injection to increase production and $6.51 billion for equipment to convert that region's tar-like oil into a free- flowing, low-sulfur crude oil for export, according to the plan. The project is located in the Carabobo area of the Orinoco belt, about 450 kilometers (280 miles) from Caracas.