This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L  CARACAS 000708 
 
SIPDIS 
 
 
NSC FOR TSHANNON AND CBARTON 
DEPT OF ENERGY FOR DPHUMPHREY AND ALOCKWOOD 
 
E.O. 12958: DECL: 02/26/2014 
TAGS: EPET ECON VE
SUBJECT: CHEVRONTEXACO GRANTED SECOND OFF-SHORE GAS BLOCK 
 
REF: 2003 CARACAS 4142 
 
Classified By: AMB. CHARLES S. SHAPIRO; REASONS 1.4 (B) AND (D) 
 
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SUMMARY 
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¶1. (C) Energy Minister Rafael Ramirez_ announced February 19 
the award of Block 3 of the off-shore Deltana Platform 
natural gas project to ChevronTexaco.  Despite the fact that 
ChevronTexaco was the only bidder for the block in December 
2003, ChevronTexaco de Venezuela President Ali Moshiri said 
he was pleased but surprised.  The project was apparently 
kept on track as a result of representations to Chavez by 
Ramirez_ and PDVSA President Ali Rodriguez despite current 
political tensions over the recall referendum on Chavez's 
presidency.  Moshiri confirmed press reports that 
ChevronTexaco expects to begin its drilling program in Block 
2 in August and stated bluntly that he believes the Deltana 
Platform project is significantly ahead of the Mariscal Sucre 
project, the supposed keystone of natural gas development in 
Venezuela.  A Colombia-Venezuela gas pipeline remains stalled 
as a result of GOV military concerns about energy integration 
with its neighbor.  End Summary. 
 
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BACKGROUND 
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¶2. (SBU) The Deltana Platform is located in waters contiguous 
with Venezuela,s maritime border with Trinidad and consists 
of 27,000 square kilometers with estimated proven gas 
reserves of 20-30 trillion cubic feet.  The first two of five 
planned blocks in the project were awarded in February 2003 
to ChevronTexaco and Norway,s Statoil (Blocks 2 and 4 
respectively), in a widely criticized bidding process. 
Critics disputed the transparency of a process in which the 
GOV designated a short list of preferred bidders.  Blocks 3 
and 5 were subsequently re-opened for an international 
bidding process in September 2003 in which 13 companies 
bought bid packages.  In early December 2003, ChevronTexaco 
was the sole bidder, on Block 3 only, pledging a $5 million 
bonus for the block.  Block 1 is still outside the bidding 
process with the GOV holding talks with BP, which operates 
the Kapok field in contiguous Trinidadian waters.  Guillermo 
Quintero, President of BP Venezuela Holdings, recently told 
econoff that progress is being made in this dialogue. 
 
¶3. (C) The requirements for the first Deltana Platform 
bidding round required the winners to take on a minority 
partner within 60 days of winning the bid.  ChevronTexaco 
took on ConocoPhillips (which Moshiri describes as a "passive 
partner") as its partner in Block 2.  Despite the 
requirement, Statoil to date has not taken on a partner for 
Block 4.  Moshiri speculated that Statoil cannot find a 
perspective partner willing to take on a share of the $40 
million bid price.  According to the terms and conditions of 
the Block 2 bidding process, PDVSA may take anywhere from a 1 
percent to a 30 percent share of the block once commerciality 
is declared.  The terms and conditions for the second Deltana 
Platform bid round did not require the winner to take on a 
partner and Moshiri told econoff in December that 
ChevronTexaco would probably plan to operate Block 3 itself. 
 
 
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AWARD A PLEASANT SURPRISE 
------------------------- 
 
¶4. (C) In a February 23 meeting, ChevronTexaco de Venezuela 
President Ali Moshiri told econoff he was pleased but 
surprised the award had been made.  Moshiri underlined that 
he had not sought to communicate with the Ministry about the 
bid during the three-month wait "in order to preserve the 
transparency of the process."  Another ChevronTexaco employee 
confided to econoff February 22 that Moshiri had told him 
that Minister Rafael Ramirez_ and PDVSA President Ali 
Rodriguez had urged President Chavez to approve the award to 
ChevronTexaco despite the current tension in the bilateral 
relations between the U.S. and Venezuela.  Both Ramirez_ and 
Rodriguez are reported to have said that ChevronTexaco has 
 
been scrupulously apolitical. 
 
¶5. (C) Moshiri confirmed press reports that ChevronTexaco 
expects to begin its drilling program in Block 2 in August. 
In fact, ChevronTexaco and Statoil will meet the week of 
March 1 to discuss sharing a drilling rig.  Blocks 2 and 3 
will be united into a single operational area which will 
benefit from the proximity of the Manatee Field in contiguous 
Trinidadian waters in which ChevronTexaco and British Gas 
(BG) both have 50 percent equity.  Moshiri revealed that 
ChevronTexaco has just completed negotiations with BG to take 
over operation of the Manatee Field.  Moshiri said he 
believes the prospects for Block 3 are as good as those for 
Block 4 for which Statoil paid $40 million so, laughed 
Moshiri, it was cheap at $5 million. 
 
--------------------------------------------- --------------- 
DISARRAY IN DEVELOPMENT OF VENEZUELA'S OTHER NATURAL GAS 
RESOURCES 
--------------------------------------------- --------------- 
 
¶6. (C) The GOV has planned that the keystone project in the 
development of Venezuela,s offshore natural gas resources 
would be the so-called Mariscal Sucre project.  This project, 
which has gone through a number of incarnations over more 
than ten years, envisions the construction of a $2 billion 
liquefied natural gas plant in Guiria on Venezuela,s Paria 
Peninsula.  Despite the signature of an MOU by project 
partners PDVSA, Shell and Mitsubishi in 2002, progress has 
been slow.   Although Shell Venezuela President Joaquin 
Moreno told econoff on January 28 that he expects a joint 
venture agreement will finally be signed in August, other 
industry sources in Caracas are skeptical.  The financing for 
the project may also be problematic.  The GOV decided in 2001 
that PDVSA would take a 60 percent share in the project. 
Given the company's current problems, industry sources have 
questioned whether it could come up with the money.  The 
Venezuelans have offered Qatar a nine percent share of the 
project but a local attorney now providing legal services to 
PDVSA has told econoff he doubts Qatar will ultimately decide 
to come into the project.  (Note:  In fact, Ali Moshiri told 
econoff that, in a February 19 meeting with Minister Ramirez_, 
the Minister had delicately asked him if ChevronTexaco would 
consider taking Qatar on as a partner in Block 3 of the 
Deltana Platform.  End Note)  Shell has also informed econoff 
that it has not yet begun lining up the financing for the 
multi-billion dollar project. 
 
¶7. (C) Ali Moshiri stated bluntly to econoff that he believes 
the Deltana Platform project is significantly ahead of the 
Mariscal Sucre project.  Noting that the Mariscal Sucre 
partners have an MOU spelling out the broad outlines of the 
business model but no license, Moshiri said that 
ChevronTexaco now has a license as well as a development plan 
spelling out how it will manage the exploration project and 
cost recovery as well as how it will pay sunk costs.  "As 
soon as we find gas, we can move ahead," he said.  When 
econoff asked whether the company has the option to take the 
gas out through Trinidad, he responded that the parties must 
mutually agree to do so.  The GOV, he posited, would not 
agree.  ChevronTexaco itself would move ahead to build the 
Guiria facility, he said, "if there is enough gas." 
 
¶8. (C) Turning to a discussion of his competitors, Moshiri 
said the Ministry is disappointed with Shell and Statoil. 
Commenting that the Ministry of Energy and Mines "is as much 
a political as an energy ministry," Moshiri noted that former 
PDVSA President Luis Giusti is on the Shell Board and thus 
the current GOV believes Shell is meddling in Venezuelan 
politics behind the scenes.  Moshiri said the Minister of 
Energy and Mines has also been disappointed that Statoil had 
not lived up to promises it made when it came into the 
Venezuelan market. 
 
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OTHER NATURAL GAS OPTIONS COMING 
-------------------------------- 
 
¶9. (C) The Ministry of Energy and Mines has announced that it 
will  moved ahead this year with a bid round on additional 
off-shore exploratory areas in the Gulf of Venezuela and West 
Falcon in western Venezuela.  Moshiri confirmed that 
 
ChevronTexaco will also take a close look at these blocks, 
particularly as they are located close to the company's 
Venezuelan home base in Maracaibo. 
 
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COLOMBIA-VENEZUELA GAS PIPELINE 
------------------------------- 
 
¶10. (C) Moshiri said he expects to meet with Colombian 
President Uribe and Colombian Energy Minister Luis Ernesto 
during their visit to Caracas for the G-15 Summit.  Moshiri, 
whose regional responsibilities also cover Colombia, is 
trying to push ahead on an MOU between Venezuela and Colombia 
to allow development of a cross border gas pipeline to carry 
Colombian gas to Venezuela.  Despite the fact that the gas is 
desperately needed in western Venezuela for injection into 
oil wells as well as commercial and other industrial uses, 
Moshiri said ideology is driving the business and the 
Venezuelan military is saying "no" to the pipeline.  Finally, 
Moshiri noted that both Venezuelan Energy Minister Rafael 
Ramirez_ and Colombian Minister Luis Ernesto have told him 
they are proud of what they have done to stop the leakage of 
subsidized Venezuelan gasoline into Colombia. 
 
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COMMENT 
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¶11. (C) ChevronTexaco was the only bidder on Block 3 and it 
would, perhaps, have been embarrassing for the GOV to reject 
the bid.  But the bottom line is that, through deft handling, 
ChevronTexaco has managed to maintain an excellent 
relationship with the GOV and is expanding its opportunities 
in Venezuela. 
SHAPIRO 
 
 
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      2004CARACA00708 - CONFIDENTIAL