San Diego (Platts)--10Mar2008

Venezuela's Orinoco heavy oil belt continues to draw the interest of
foreign investors, even in the wake of altered ownership of joint venture
development projects, Citgo Chairman, President and CEO Alejandro Granado
Monday indicated Monday during an industry event here.

Citgo is the US downstream arm of Venezuelan state oil company PDVSA.

PDVSA is engaged in an ongoing legal battle with ExxonMobil over the
nationalization of its upstream oil assets in Venezuela, including those in
the Orinoco region. Its handling of both the nationalization and the redrawing
of ownership terms with foreign-based producers has raised concerns about its
friendliness to outside investment.

Nevertheless, Granado pitched Venezuela, and the Orinoco area, as still
prime for foreign investors.

In addition to the escalating battle with ExxonMobil, which has obtained
court orders freezing some $12 billion in PDVSA's foreign assets, Venezuela
also is negotiating compensation terms with ConocoPhillips, another major that
chose to not stay in the country following the new terms for foreign
participation enacted last year.

Several foreign companies have made significant investments in Venezuelan
crude production, Granado said during a Citgo luncheon at the National
Petrochemical and Refiners Association's annual meeting. As an example, he
cited Eni's recent decision to invest in Orinoco developments. Eni received
$700 million from PDVSA last month to settle a dispute over the Dacion field.

Granado also noted a development joint venture by Belarusneft and China
National Petroleum Corporation.

Granado said the previous upstream development deals under which
companies such as ExxonMobil and ConocoPhillips operated were an "unacceptable
business model" for Venezuela. He also charged both companies with using
"financial engineering" to avoid making tax payments that were required under
the agreement.

Granado reiterated statements made in January by Venezuelan President
Hugo Chavez that the country's proven oil reserves are expected to increase
to 313 billion barrels by the end of 2009, and added that that figure could
significantly increase with new technology believed to make the crude 60%
recoverable. Those projects offer additional incentives for companies to
invest in Venezuelan projects.

"New technology has to be considered jointly, while respecting national
sovereignty," Granado said.

--Robert Mayer, robert_mayer@platts.com
--Esa Ramasamy, esa_ramasamy@platts.com