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Venezuela to Cut Chevron, BP, Shell Output for OPEC

Bloomberg

 

 

Venezuela to Cut Chevron, BP, Shell Output for OPEC (Update2) 

By Steven Bodzin

Dec. 17 (Bloomberg) — Venezuela, a founding member of the Organization of Petroleum Exporting Countries, will cut output at joint ventures with Chevron Corp.BP Plc and Royal Dutch Shell Plc to help restrain oil supply and bolster prices.

The South American nation must cut 189,000 barrels under a deal reached today in Algeria, Eulogio del Pino, who manages state-owned Petroleos de Venezuela SA’s joint ventures, said today in a text message to Bloomberg News. The cuts represent about 5.9 percent of Venezuela’s total oil output.

Venezuela earlier imposed output reductions on its private- sector partners when OPEC decided on a cut Oct. 24. Oil producers in Venezuela slashed 126,000 barrels from daily output, del Pino said Nov. 26.

“We’re ready for a big output cut,” Energy and Oil Minister Rafael Ramirez said today at an OPEC meeting in Oran, Algeria. “The goal is to slow the fall in prices.”

The latest round of reductions focus on ventures that produce so-called heavy oil, del Pino said. The partnerships he named include those with ONGC Videsh Ltd., China National Petroleum Corp., Harvest Natural Resources Inc. and Anadarko Petroleum Corp. Petroleos de Venezuela will also cut its own production in the western part of the country, he said.

Crude for January delivery declined $3.45, or 7.9 percent, to $40.15 a barrel today in New York Mercantile Exchange floor trading. Futures touched $39.88, the lowest since July 2004. Prices have tumbled 73 percent from a record $147.27 on July 11.

OPEC today cut members’ quotas by 2.46 million barrels a day to try to force prices to about $75 a barrel.

Heavy Oil Cuts

Cutting output of lower-value heavy oil may allow Venezuela to comply with cuts while minimizing losses. The country relies on oil for 92 percent of its export income and about half its government revenue. Under Venezuelan PresidentHugo Chavez, PDVSA has expanded to run food and education programs.

Venezuela’s joint venture partners have had to accept a range of contract changes in recent years, including rising taxes and declining stakes. The BP partnership Petromonagas used to include Exxon Mobil Corp. until the company left the country instead of being forced into a minority, non-operating stake.

“Anadarko had previously announced it is divesting its interest in Venezuela and has no reported production or reserves associated with Venezuela,” John Christiansen, a spokesman for Anadarko, said in an e-mailed comment.

Chevron, Shell and Harvest Natural didn’t immediately respond to calls for comment. Officials at BP, ONGC Videsh and CNPC said they had no further information about the cuts and declined to comment.

The country is trying to expand production of lighter, higher-value oil through its largest-yet oilfield auction. Nineteen companies, including several that will face output cuts under Venezuela’s plan for OPEC, have paid $2 million each to move ahead with a bidding process that will conclude this year.

To contact the reporter on this story: Steven Bodzin in Caracas at[email protected].

Last Updated: December 17, 2008 20:20 EST

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