Venezuela Exit Would Challenge ConocoPhillips Output Targets

The most immediate effect of ConocoPhillips’ decision to exit Venezuela’s oil-rich Orinoco river basin and seek redress through arbitration will be to challenge the U.S. oil company’s short-term production goals.

Conoco, the third largest U.S. oil company by market capitalization, in 2006 garnered about 4% of its production and 9% of its oil and gas reserves from the Venezuelan heavy-oil projects, according to the company’s annual report. Rather than accede to Venezuela’s terms, Conoco plans to challenge Venezuela’s seizure of the ventures through international arbitration, the Wall Street Journal reported Tuesday.

In a move that continued a broad restructuring of Venezuela’s oil assets, state oil firm Petroleos de Venezuela said it has taken an average stake of 78% in four multi-billion dollar extra-heavy oil projects in the Orinoco belt, effectively doubling its previous average equity interest in them.

Venezuelan oil minister Rafael Ramirez confirmed that Conoco and Exxon Mobil Corp (XOM) will end participation in the Orinoco, home to vast reserves of Venezeula’s heavy, tar-like oil. Of the six oil majors active in the area, Conoco was the most exposed to Venezuela, with its 50.1% stake in Petrozuata, 40% stake in the Ameriven, or Hamaca, heavy-oil project. Conoco also has a stake in Corocoro, a large, shallow-water oil field in Venezuela’s eastern waters.

Dow Jones Newswires