16 Dec 2010 20:00

Junin-6 project in Venezuela will cost $24 bln

MOSCOW. Dec 16 (Interfax) - The Russian oil consortium in Venezuela, National Oil Consortium LLC (NNK) and Venezuelan PDVSA will have to spend $24 billion to develop the Junin-6 project, Gazprom Neft said in materials, citing the head of the project office in Venezuela, Gazprom Neft Yury Levin.

"Total spending on the project equals $24 billion," he said, noting that PDVSA will supply 60% of the financing and NNK - 40%. "The issue of loan financing has not been raised so far, since NNK possesses sufficient internal funds to implement the first phase of the project. Loans will be needed after we move to the second phase, when tens of billions of dollars will be required," Levin said.

The total includes financing for construction of infrastructure, excluding sea terminals. "It is unclear for now who will build the export pipeline, whether it will be NNK or PDVSA; the builder will later be compensated out of the tariff on the oil shipped. One option begin considered is the possibility of having Transneft build the pipeline, but the negotiating process has not been completed," Levin said.

It was reported earlier that Gazprom Neft has been appointed Russian coordinator of the project to develop the Junin-6 block in Venezuela's Orinoco heavy oil belt. Rosneft is leading the political side: preparing intergovernmental documents and studying other projects. Operational issues concerning Junin-6 will be decided by PetroMiranda, a joint venture between NNK and PDVSA.

As for whether NNK members can book Junin-6 reserves, Levin commented: "We asked specialists at Ernst & Young to give a recommendation concerning the possibility of booking reserves under IFRS. There has been no final answer, but based on the preliminary conclusions, it is realistic. Each of the Russian companies would get 8% of the reserves."

NNK was formed in October 2008 by five Russian oil majors, each with 20% stakes: Gazprom Neft, Lukoil , Rosneft, Surgutneftegas and TNK-BP .

NNK and Corporacion Venezolana del Petroleo (CVP), a PDVSA subsidiary, registered PetroMiranda in April 2010. CVP has a 60% interest in the JV and NNK has 40%. Oil in place at Junin-6 totals 52.6 billion barrels.