VietNamNet Bridge – Vietnam National Oil and Gas Group (PVN) has decided to suspend oil extraction from Block Junin 2 in Venezuela because inflation has sent goods prices soaring and because the gap between the official and unofficial exchange rates is increasingly wide in the South American country.

Illustrative image. – File photo

PVN chairman Phung Dinh Thuc said at a news briefing on PVN’s business plans held on Tuesday that the current situation in Venezuela was very difficult as its economy is in distress, with inflation running high and the exchange rate difference between the formal and informal markets expanding to around ten times. With such unfavorable market conditions, no investors could afford to pour money there and hire Venezuela firms to implement their projects, he added.

“Therefore, foreign firms including PVN have temporarily suspended the project to negotiate with Venezuelan partners to adjust contract terms and wait for the investment environment to improve before deciding whether to go on with the project,” Thuc said.

Oil reserves of the Junin 2 project are estimated at around 1.4 billion barrels, with the first barrel produced in September 2012. Leaders of PVN told the media about two years ago that they were pinning high hopes on oil explorations in Venezuela, including at Junin 2 with daily output projected at 200,000 barrels per day.

PVN earlier signed deals with some banks to borrow over US$430 million for its oil projects in Venezuela.

PVN earlier said it had transferred US$1.8 billion abroad to implement its investment projects there with total registered capital of nearly US$5.3 billion.

Thanks to its overseas investment activity, PVN has discovered a couple of oil blocks with total estimated reserves of over 200 million tons of oil equivalent. Its profits from overseas oil projects have been put at over US$280 million.

PVN’s oil project in Russia is operating effectively and the group will be tapping other blocks in Algeria and Peru this year, according to Thuc.

In related news, PVN is getting involved in an ethanol production project in each of Phu Tho, Quang Ngai and Binh Phuoc provinces. With the project in Binh Phuoc, PVN holds a 29% stake while the Japanese partner contributes 49% of capital, according to Thuc.

PVN has worked with Quang Ngai and Ba Ria-Vung Tau provinces to ask fuel trading firms of PV Oil to use biofuel (E5).

PVN sold 32,000 cubic meters of ethanol last year, up 44% from 2012. However, such ethanol volume was too modest compared to the capacities of the two operational projects in Quang Ngai and Binh Phuoc.

Due to small consumption and the unpopularity of biofuel in Vietnam, Itochu is reportedly planning to withdraw from the ethanol project in Binh Phuoc, Thuc said.

Under the road map for ethanol use, ethanol will be used in seven provinces and cities in December and widely used in 2015.

According to PVN deputy general director Le Minh Hong, revenues earned by units under PVN nearly reached VND763 trillion last year, exceeding the target by 18%, and paid nearly VND196 trillion in taxes.

PVN looks to extract 26.63 million tons of oil equivalent and earn revenues of VND673 trillion this year, Hong said.

Source: SGT