Chevron to Develop Venezuelan Oil Field

ChevronTexaco Corp. and Spain’s Repsol agreed Thursday to invest $6 billion to develop a new oil field in Venezuela, home to the largest oil reserves in the Western Hemisphere.

The project will include the production of extra-heavy Faja crude and a new regional pipeline to carry the oil, San Ramon, Calif.-based ChevronTexaco said. It will also include new facilities in Venezuela to upgrade the crude to a high-quality synthetic crude or fuels.

Chief Executive David O’Reilly is increasing investment in Venezuela to offset declining output from older wells in other parts of the globe. Venezuelan wells accounted for 8.6% of ChevronTexaco’s worldwide oil production in 2004. The company is the largest foreign producer of Venezuelan oil.

“For all of the major oil companies, Venezuela is a growth area,” said Louis Gagliardi, an analyst at Norwalk, Conn.- based John S. Herold Inc. and a former Texaco Inc. executive. Bringing in Repsol “is a way they can diversify the risk on a big project like this.”

The firm said its average daily worldwide oil and gas production during the first two months of this year was 7.8% lower than in the first quarter of 2004.

ChevronTexaco’s oil output declined 6% to a daily average of 1.782 million barrels in January and February, and gas production fell 13% to 3.725 billion cubic feet a day, the company said in an interim report on quarterly results published on its website.

Venezuela has relied on foreign oil companies to help develop its extra-heavy crude reserves, located in the Faja, a region above the Orinoco River in the eastern states of Monagas and Anzoategui.

Extra-heavy crude is mixed with thinning agents so it can flow through pipelines to plants where it’s processed into a lighter grade of crude for export. Venezuela has potential reserves of 270 billion barrels of extra-heavy crude.

ChevronTexaco and Repsol will split the project’s cost, ChevronTexaco spokeswoman Margarita Arango said.

Petroleos de Venezuela, Venezuela’s state-owned oil company, has four joint ventures with foreign producers to pump crude from the Orinoco Belt to the Caribbean coast for export to refineries in the U.S. and other countries.

In addition to ChevronTexaco, those ventures include BP, ConocoPhillips, Exxon Mobil Corp., Norway’s Statoil and France’s Total.

Shares of ChevronTexaco rose 5 cents to $58.31 on the New York Stock Exchange. The shares have risen 33% in the last year.