Japan to Invest $33.5 Billion in Venezuela's Petrochemical, Oil and Gas Sectors

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Researched by Industrial Info Resources (Sugar Land, Texas)--Following recent meetings in Tokyo between Japanese Prime Minister Taro Aso and Venezuelan President Hugo Chavez, the two nations entered into agreements to cooperate in 12 projects under which Japan will invest $33.5 billion in Venezuela's petrochemical and oil and gas sectors over the next five years. These include an outlay of $8 billion in petrochemical projects, $1.5 billion in crude oil refining, and $10 billion in liquefied natural gas (LNG) projects. The two countries have also set up an investment fund of $4 billion as part of the larger investment package in the petrochemical and oil and gas sectors. The cooperation will benefit resource-starved Japan while opening up new avenues of financial assistance for Venezuela.

Japan will invest more than $8 billion to develop oil blocks in Venezuela's Orinoco belt over the next five years. State-owned Petroleos de Venezuela SA (PDVSA) (Caracas, Venezuela) entered into an agreement with Mitsubishi Corporation (TYO:8058) (Tokyo, Japan), Inpex Corporation (TYO:1605) (Tokyo), and Japan Oil, Gas, and Metals National Corporation (Kanagawa, Japan) to undertake a two-year study to determine the reserves of the Junin 11 Block and the cost of oil extraction. The block has estimated reserves of 6 billion barrels of oil, and an estimated long-term production capacity of 200,000 barrels per day (BBL/d). Japan will also invest $6 billion to explore the coastal region of Venezuela.

PDVSA entered into four memorandums of understanding with Mitsubishi, Mitsui & Company Limited (TYO:8031) (Tokyo), Itochu Corporation (TYO:8001) (Osaka, Japan), and Marubeni Corporation (TYO:8002) (Tokyo) to develop offshore natural gas fields in the Proyecto Mariscal Sucre region. PDVSA holds a majority stake of 60% in the gas fields, while the remaining 40% will be held by Qatar Petroleum (Doha, Qatar) and a few Japanese firms. The project would enable the transport of gas from Venezuela to Japan after 2013.

Gas from the fields will be supplied to Venezuela's first LNG train, being developed as part of a $12 billion LNG project comprising two gas liquefaction plants, each with a capacity of 4.7 million tons per year. PDVSA holds a majority stake of 60%, Galp Energia SGPS SA (ELI:GALP) (Lisbon, Portugal) holds a stake of 15%, and a Mitsubishi-Mitsui joint venture holds a stake of 5% in both the LNG trains. Chevron Corporation (NYSE:CVX) (San Ramon, California) and Qatar Petroleum have an equal share in the balance stake of 20% in Train 1, while Energía de Entre Ríos SA (Enersa) (Parana, Argentina) and Itochu have an equal share in the balance stake of 20% in Train 2.

The Japan Bank for International Cooperation (Osaka, Japan), formerly Export-Import Bank of Japan, signed a memorandum of understanding to consider meting out a loan of $1.5 billion to PDVSA to expand the firm's 200,000-BBL/d Puerto La Cruz refinery in eastern Venezuela and the 140,000-BBL/d El Palito refinery in the state of Carabobo. Mitsubishi and Itochu have also committed an investment of $750 million in each refinery.

PDVSA also entered into a commitment with Marubeni to jointly assess various financing options to develop industrial facilities next to the extra-heavy oil upgrading facilities in the Junin and Carabobo blocks in the Orinoco belt.

Petroquimica de Venezuela SA (Pequiven) (Valencia, Venezuela), a state-owned petrochemical and fertilizer firm, entered into an memorandum of understanding with Marubeni to assess the feasibility of jointly undertaking the expansion of its polyethylene and olefin units at the Ana Maria Campos Petrochemical Complex, and to develop up a new fertilizer unit at Jose. Pequiven also signed an commitment with Mitsubishi for explore the feasibility of setting up production units for ammonia, methanol, polyolefins and urea at Jose, and another memorandum with Mitsui to enable the latter's involvement in petrochemical projects.

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