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Cablegate: Venezuela: Chavez's Early Announcement of Repsol's

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C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 001208

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ENERGY FOR ALOCKWOOD AND LEINSTEIN, DOE/EIA FOR MCLINE
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MKACZMAREK
COMMERCE FOR 4332/MAC/WH/JLAO
NSC FOR DRESTREPO AND LROSSELLO

E.O. 12958: DECL: 09/14/2019
TAGS: EPET EINV ENRG ECON CU VE
SUBJECT: VENEZUELA: CHAVEZ'S EARLY ANNOUNCEMENT OF REPSOL'S
NATURAL GAS DISCOVERY

REF: A. 05 CARACAS 2807
B. CARACAS 239
C. CARACAS 853
D. CARACAS 1017

CARACAS 00001208 001.2 OF 002


Classified By: Economic Counselor Darnall Steuart, for reasons
1.4 (b) and (d).

1. (C) SUMMARY: On Friday, September 11, President Chavez
trumpeted that Spanish oil company Repsol had made a
significant natural gas discovery in the Gulf of Venezuela.
Repsol issued a press release reiterating President Chavez's
statement. This discovery was made in one of seven off-shore
blocks offered in the 2005 Rafael Urdaneta Round. Industry
experts in Venezuela indicate that the announcement was
likely premature, but cede that Repsol may have made a
substantial natural gas discovery. END SUMMARY.

2. (C) President Chavez told the media that the Pearl 1
offshore exploratory well drilled by the Spanish Repsol and
Italian ENI consortium had discovered a reservoir of great
potential, which could hold between 7 and 8 trillion cubic
feet (TCF) of gas. He stated that this was the largest gas
find in Venezuela's history. Repsol's press release notes
that PDVSA will have a 35% stake in the development phase,
with Repsol and ENI keeping 32.5% each.

3. (C) A British Petroleum employee seconded to a PDVSA joint
venture told EmbOff that the numbers announced by Chavez
resembled an earlier, pre-exploration estimate by his
company. Chevron's Commercial Manager for Block 2 of the
off-shore Platforma Deltana (PD2) in Eastern Venezuela, Bret
Tarpley (strictly protect throughout), told Petroleum Attache
(PetAtt) that if the field is as large as announced, it would
be about the same size as PD2. He thought it premature for
Repsol to announce the numbers (NOTE: Repsol has only
reiterated the numbers announced by Chavez) and was sure that
Repsol had not yet tested the reservoir. He noted that
Chevron had drilled four test wells in PD2 before it could
confirm the reservoir's size and added that a geologist with
ENI shared that it had found "a small section of potential
pay" in the Gulf of Venezuela. (NOTE: As reported in Reftel
D and previous, Repsol and ENI have a contract with U.S.
drilling company ENSCO to drill one exploratory well (with
the option for a second) in the Gulf of Venezuela. ENSCO is
anxious to re-export its rig from Venezuela so Repsol may
face difficulties in contracting a rig to continue testing
the reservoir. END NOTE.)

4. (C) Finally, xxxxxxxxxxxx ,
for Pearl 1, confirmed to
PetAtt that the discovery could be the largest natural gas
find in Repsol's history. However, he questioned the source
of the numbers President Chavez announced, claiming an oil
company would normally be more precise with the estimated
size of a discovery.

5. (C) COMMENT: It is not clear what the real size and
characteristics of the newly discovered reservoir are, though
7-8 TCF of natural gas appears to be the upper limit.
Venezuela originally launched the Rafael Urdaneta project in
the Gulf of Venezuela in order to increase domestic supply.
In fact, western Venezuela is dependent upon natural gas from
Colombia for domestic residential and industrial demand.
Since the government provides subsidized natural gas to
domestic users, an international oil company will find
developing a profitable business model challenging.

6. (C) It is not unusual for President Chavez's announcements
to be erroneous in fact, but accurate in direction. Earlier
this summer he announced the completion of a test well in the
Dragon block of Mariscal Sucre. Post later learned that in
reality, the drill team had actually only completed drilling
to the well's third zone (depth) of five planned zones.
However, what is not in question is Venezuela,s actual

CARACAS 00001208 002.2 OF 002


record of developing its off-shore natural gas resources.
Venezuela has been talking about the development of natural
gas off Eastern Venezuela for the last twenty years but has
yet to build a natural gas train. During the same period,
Trinidad & Tobago has completed at least four LNG trains.
DUDDY

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