Eni to finance PDVSA with $2B to advance Junin 5 heavy oil project in Venezuela

By Phaedra Friend Troy

Italian major Eni has agreed to provide $2 billion in financing to Venezuela’s state-run PDVSA for a heavy oil development in the Orinoco oil belt and a power plant in the Guiria peninsula. 

Eni’s CEO Paolo Scaroni met with the Minister of Energy and Petroleum of Venezuela and the President of PDVSA Rafael Ramirez in Caracas Thursday to discuss Venezuelan projects on which they work together. 

Eni has agreed to pay up to $1.5 billion of PDVSA’s development costs for the Junin 5 heavy oil project, as well as $500 million toward a power plant in the South American country. 

Junin 5 Heavy Oil Project 

Through an agreement signed in 2008, Eni and PDVSA jointly own the Junin 5 heavy oil project in the Faja of Orinoco, which is estimated to contain some 35 billion barrels of oil in place. 

The companies have decided to move forward with a phased development of the Junin 5 project, with early production of 75,000 barrels of oil a day scheduled to start in late 2013. The phased development calls for full production of 240,000 barrels of oil a day to be reached in 2018, and the construction of a new refinery on the coast in Jose. 

The companies plan to drill at least 10 wells this year on the Junin 5 project, and may decide to start an even earlier production phase in late 2012 of 7,000 to 10,000 barrels of oil a day. 

The upstream operating company for Junin 5, Petrojun I plans to award the main engineering contracts on the exploration and production phase, including processing facilities and pipelines, as well as the drilling contracts in the third quarter of 2011. 

Additionally, the downstream operating company, PetroBicentenario will award the contract for the new refinery by the end of 2011. 

Eni Finances PDVSA Projects 

Eni has agreed to finance PDVSA’s share of the early production phase development costs on Junin 5 up to $1.5 billion. 

The Italian company has also committed to a social project to help Venezuela, dedicating a tranche of the Junin 5 bonus and additional financing to PDVSA of $500 million toward a power station to be built in Guiria peninsula. 

PDVSA holds 60 percent interest in the upstream and downstream operating companies that control the Junin 5 heavy oil project. Eni holds the remaining 40 percent interest. 

Spanning some 670 square kilometers, Junin 5 is located in the State of Anzoategui, about 550 kilometers southeast of Caracas. 

Additionally, Eni holds a 50-percent stake in super-giant Perla natural gas field offshore Venezuela. Estimated to contain more than 16 trillion cubic feet of natural gas, the Perla field has completed the Front End Engineering and Design (FEED) study for an early production stage on the field, and a gas sales agreement is being discussed with PDVSA. 

Eni is also a partner in Petrosucre, which operates the Corocoro oil field in the Gulf of Paria.

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