By Deisy Buitrago, Sheila Dang and Marianna Parraga
CARACAS/HOUSTON, Sept 16 (Reuters) - ExxonMobil is negotiating to return to Venezuela and has shown interest in the large Petromonagas heavy oil project in the Orinoco Belt - where the US energy major previously had a stake - as well as in areas in the neighboring Carabobo block, according to people familiar with the matter.
A reentry into Venezuela by Exxon, if finalized, would mark a staggering reversal for the company after it exited the OPEC country
nearly two decades ago amid a dispute triggered by the nationalization of its oil projects by the government of former President Hugo Chavez.
Exxon has so far remained on the sidelines as rivals completed deals after US President Donald Trump urged companies to invest in Venezuela following the capture of then-president Nicolas Maduro in January. CEO Darren Woods drew Trump's ire at the time when he called the country "uninvestable."
Still, the company has sent technical teams this year to evaluate oilfields in Venezuela.
On Wednesday, Continental Resources - founded by billionaire Harold Hamm - signed a memorandum of understanding with Venezuela's state oil company PDVSA to operate and develop the Ayacucho 2 area in the prolific Orinoco, the country's largest output region.
Earlier this month, Italy's Eni and Chevron completed final agreements in Caracas to expand projects and boost oil output in the South American country.
EXXON CONSIDERS RETURN TO CERRO NEGRO
Following failed negotiations earlier this year with PDVSA for other areas on offer, Exxon is now considering a return to Petromonagas, formerly called Cerro Negro. The field was previously the company's main project in the nation and remains one of the few with an operational upgrader capable of turning the Orinoco's extra heavy crude into lighter exportable grades.
Following Exxon's exit from Venezuela in 2007, Russian energy powerhouse Rosneft acquired a 40% stake in Petromonagas that in 2020 was transferred to Roszarubezhneft, a state firm that took over Russian assets overseas to shield them from US sanctions. It is still unknown how Russia's ownership could affect any deal.
The Venezuelan and Russian governments have said this year that Russia remains the holder of a stake in Petromonagas and other large oil projects it shares with state company PDVSA.
"We have agreements with China and Russia involving joint ventures that hold valid authorizations to carry out primary activities. We fully respect those agreements, and—regarding the joint ventures in which they hold a stake—they will continue to carry out their operations," Venezuelan oil minister Paula Henao said earlier this month in a TV interview.
The Trump administration, however, has been clear in its intent to expand the presence of US firms in Venezuela, while limiting the access of companies from "adversaries," including China and Russia.
Exxon and PDVSA did not immediately respond to requests for comment.
The Wall Street Journal and Bloomberg reported details about Exxon's negotiations earlier on Wednesday.
THE EXXON ADVANTAGE
Exxon previously operated Cerro Negro with a 41.67% interest in the project until it was nationalized and taken over completely by PDVSA.
Company executives have said Exxon would have an advantage if it decided to return, given its previous operations and familiarity with the country's vast heavy and extra heavy crude resources. Venezuela sits on the world's largest oil reserves, with the lion's share concentrated in the Orinoco Belt.
One key advantage is the company's experience with extracting heavy oil at its Canada projects, Woods has said.
"The work that we've been doing up in Canada ... positions us uniquely in terms of low-cost production of the Venezuela resource," he said in May.
While the upgrader is currently in service, Petromonagas will likely need maintenance and major repairs after decades of insufficient investment amid US sanctions and a need to produce feedstock for the country's refineries instead of exportable oil, according to PDVSA documents seen by Reuters and sources.
CONOCOPHILLIPS AT IMPASSE UNTIL DEBT REPAYMENT
Meanwhile, ConocoPhillips, the third-largest US oil producer by volume, is stonewalling any negotiations to reenter Venezuela until it secures payment of some $11 billion owed by the country and PDVSA from the expropriation of its projects, according to two sources familiar with the matter.
ConocoPhillips did not immediately respond to a request for comment.
The company participated in two heavy crude projects also in the Orinoco - Hamaca and Petrozuata - in addition to the Corocoro offshore oil project, which was also nationalized in 2007. Like Exxon, Conoco exited the country and filed for international arbitration that year.
After years of dispute, arbitration courts have considered the expropriation "unlawful," awarding ConocoPhillips billions of dollars, most of which the company is still seeking to collect following an unfinished payment agreement with PDVSA, attempts to seize the company's Caribbean assets and participation in a court-ordered auction pursuing Venezuela-owned refiner Citgo.
"That's our first priority right now. They owe us a significant amount of money and we've been after that," said then-CEO Ryan Lance in February.
(Reporting Deisy Buitrago in Caracas and Marianna Parraga and Sheila Dang in Houston; Additional reporting by Dharna Bafna in Bengaluru; Editing by Tasim Zahid, Nathan Crooks and Lincoln Feast)
