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LUKOIL not interested to develop Venezuelan’s Junin-3 field

October 31, 2011, 22:15 UTC+3

LUKOIL Overseas has fulfilled all of its obligations under the contract for the exploration of the Junin-3 block in Venezuela but is not interested to develop the field further,.....

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MOSCOW, October 31 (Itar-Tass) —— LUKOIL Overseas has fulfilled all of its obligations under the contract for the exploration of the Junin-3 block in Venezuela but is not interested to develop the field further, the company said.

National Petroleum Consortium Director-General Ksenia Baumgarten confirmed that LUKOIL Overseas has fulfilled all of its contractual obligations with regard to Junin-3.

The Venezuelan Ministry of Energy and Petroleum and the state-owned company PDVSA will have to decide on further development of the field.

LUKOIl Overseas’ office in Venezuela has closed and has been replaced by the National Petroleum Consortium’s office in Caracas.

Earlier LUKOIL did not rule that the license for Junin-3 might be handed over to the National Petroleum Consortium that includes Gazprom Neft, LUKOIL, Rosneft, Surgutneftegaz, and TNK-BP, and plans to develop Junin-6.

This deposit in the Orinoco River Basin can produce 400,000-450,000 barrels of crude a day.

Oil from this field may be shipped, among others, to the United States. “Oil will go where buyers pay money for it. We do not rule out the U.S. market of course,” Vice Prime Minister Igor Sechin, who visited the field earlier this month, said. “This is the closest market, and the transportation route would be the shortest.”

“If there are consumers, we will treat them with respect. It is important though that the economic effect matches investments,” he said.

Investments in the development of the Junin-6 oilfield in Venezuela will exceed 10 billion U.S. dollars, Energy Minister Sergei Shmatko said.

He said, however, that this was a tentative amount.

According to Shmatko, the oilfield should produce 450,000 barrels of oil a day. “We think we have made an agreement on very attractive and interesting terms,” he said.

According to the deal between Russia and Venezuela, the consortium will develop the Junin-6 block. It also hopes to bid in tenders for the development of four Carabobo blocks. The consortium's combined investments in the Junin-6 project may amount to about 30 billion U.S. dollars.

The long-term project for the development of the Junin-6 oilfield in an area of 447.7 square kilometres envisages the production of 450,000 barrels of heavy and extra heavy oil daily. It covers the creation of infrastructure and comprehensive development of the Orinoco oil belt area.

Preliminary estimates indicate that the Orinoco River basin contains 235 billion barrels of heavy and extra heavy oil. After the international certification of all blocks of this field is completed, Venezuela's proven and recoverable oil reserves will account for 314 billion barrels. The country may rank first in the world in this respect.

According to Sechin, Venezuelan partners will have to "defend the main economic terms [of the agreement] in the National Assembly of Venezuela: and we hope that some time after that the consortium will begin physical work in Venezuela".

He said, “Russia will try to make this happen as soon as possible as much as it can.”

The project will be implemented in two stages. “Stage One is 7-10 years, during which about 12 billion U.S. dollars will be invested. In Stage Two, investments will reach 20 billion U.S. dollars,” Sechin said, adding that the overall project term might be 40 years.

He does not rule out that “other investments may become necessary”.

“I am convinced that such investments will be made because we do not know all the macroeconomic parameters that may affect the project,” Sechin said.

He expects the project to start breaking even in Stage One. “The project is divided into several stages, and a great deal of investments will be returned in the first 7-10 years,” Sechin said.



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