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Venezuela: Braskem, Petrobras to develop projects abandoned by majors

 FOREIGN majors have learned, since President Hugo Chávez took office in 1999, that Venezuela's energy sector is not as open to them as it was in the heyday of the 1990s apertura petrolera. While ExxonMobil and Royal Dutch Shell are both still involved in oil projects in the country, they have bowed out – or have been ushered out – of petrochemicals and gas projects, respectively, over the last year or so.

ExxonMobil had planned, until February, to build a $3bn petrochemicals complex with state-owned PdV's petrochemicals arm, Pequiven, at the Caribbean port of Jose. Shell, along with Japan's Mitsubishi, had planned, until mid-2005, to form a partnership with PdV to build a $2.7bn gas development and liquefied natural gas (LNG) export terminal at the Mariscal Sucre offshore area, where about 8% of Venezuela's total gas reserves of 151 trillion cubic feet are located.

In both cases, after negotiations to set the project terms stalled, PdV cancelled its plans to team up with the majors. Within months, however, Brazil's Braskem and Petrobras have emerged as replacements for ExxonMobil at Jose, and Shell and Mitsubishi at Mariscal Sucre.

Last month, Braskem, Latin America's largest petrochemicals company, said it is in talks with several potential partners to help build a Venezuelan petrochemicals complex at Jose. The necessary investment is estimated at $1.5bn-2.5bn. The partners would include Pequiven. A gas-fired cracker at the site would produce 1.2m tonnes a year (t/y) of polyethylene and the facilities could be operational by 2011.

"In capital markets, they say that investing in Venezuela carries political risk," said Paul Altit, Braskem's financial director. "The potential rewards are so great that it's worth a risk." Braskem expects to make a final decision on the Jose project by late 2007. Braskem is also considering building a 400,000 t/y polypropylene plant at El Tablazo, another northern Venezuelan port, at a cost of $370m. That project could come on stream in 2009.

Meanwhile, at Mariscal Sucre, Petrobras says it is likely to invest over $2bn to produce gas from several fields, in a 35:65 venture with PdV, which would invest around $3bn. Mariscal Sucre's gas could reach the domestic market by 2009, according to PdV. An LNG export terminal could later provide exports of as much as 20m cubic metres a day, potentially to gas-deficient Brazil, according to the director of Petrobras' international division, Nestor Cerveró. PdV and Petrobras have also said they are close to signing contracts to develop five mature oilfields in Venezuela.

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