Continental Strikes Venezuela Oil Deal with PDVSA

Continental Resources announced it has signed a memorandum of understanding with Venezuela's state oil company PDVSA to operate and develop the Ayacucho 2 Block in the Orinoco Belt. The company said the block encompasses roughly 126,000 acres in Anzoátegui state and has an estimated 30 billion barrels of resource in place. Under the MOU, the two parties will move toward a long-term Contrato de Participación Productiva; once that agreement is executed, Continental would operate Ayacucho 2 with a 100% working interest.

The deal marks Continental's first project in Venezuela and comes amid a wave of recent agreements prompted by calls from the U.S. administration for American energy firms to help rebuild Venezuela's oil industry. Continental's leadership described the opportunity as unusually significant for the company's nearly 60-year history and said the agreement elevates its global footprint beyond its established U.S. positions in basins such as the Bakken, Anadarko, Powder River and Permian, as well as recent expansions into Argentina's Vaca Muerta and a joint venture in Turkey's Diyarbak?r Basin.

The announcement follows several other large commitments targeting the Orinoco Belt. Chevron in early September committed more than $7 billion over five years to roughly double its Orinoco output to about 600,000 barrels a day. That came days after a U.S.-backed 25-year framework aimed at achieving 1.5 million barrels a day across 17 Venezuelan fields; Venezuelan officials have said such plans could generate more than $200 billion, while U.S. estimates placed near-term private investment at nearly $100 billion. Venezuela holds the world's largest proven crude reserves but has seen production fall sharply — to about 742,000 barrels a day, or roughly 0.8% of global output in the referenced year, a decline of about 70% from 2013 levels.

Separately on the same day, Turkey's Çan2 Termik subsidiary Minerosol Group signed a 20-year deal with PDVSA to take over production at the CEMA field in Anzoátegui under a $381.7 million investment plan. CEMA is reported to have about 104.2 million barrels of remaining oil reserves and 499.3 billion cubic feet of gas across 10 fields; its current output of roughly 400 barrels a day is targeted to rise to about 9,865 barrels a day. The developments underscore efforts to deploy technical expertise and private capital to tap Venezuela's extra-heavy Orinoco crude, resources that international companies possess but have been constrained from exploiting under years of U.S. sanctions.

This report is based on reporting by Charles Kennedy for Oilprice.com.