The oil giant slays back to Venezuela! Rumor has it that ExxonMobil (XOM.US) has obtained 7 regional evaluation rights, and an exclusive one-year negotiation window opens

The Zhitong Finance App learned that according to four people familiar with the matter, ExxonMobil (XOM.US) has reached a preliminary agreement with the Venezuelan government and the country's national oil company PDVSA. The US oil giant has been approved to evaluate the development potential of 7 blocks, covering undeveloped oil fields, mature oil fields, and an exploration block.

The memorandum of understanding was signed in Caracas on Monday. Acting President Delsi Rodriguez of Venezuela was there to witness it. People familiar with the matter revealed the details of the agreement.

If ExxonMobil eventually takes over this asset portfolio, it will return to the Venezuelan market with a favorable attitude; in particular, it can form collaborations with neighboring Guyana and Trinidad and Tobago businesses to dilute operating costs and improve efficiency. ExxonMobil is the operator of Guyana's high-yield Stabrock block development consortium, and it also exclusively holds interests in a large deep-water exploration area in Trinidad and Tobago.

One of the people familiar with the matter said that the preliminary agreement reached with Venezuela is not legally binding. ExxonMobil has exclusive rights for a period of one year to negotiate the terms of the contract and check the underground geological data of the oil field and other technical data. Other foreign-funded enterprises have already entered the Venezuelan energy industry through similar arrangements this year.

ExxonMobil declined to comment further, with the exception of a statement issued on Monday saying the memorandum was a “significant first step.” The Venezuelan Ministry of Petroleum and PDVSA have yet to respond to requests for interviews.

Earlier this year, Venezuela offered another set of block proposals to ExxonMobil, but the company rejected them. Since then, the two sides have focused their negotiations on several heavy oil blocks in the Orinoco Heavy Oil Belt, the largest oil producing area in Venezuela. One of these was the area where ExxonMobil operated before its assets were expropriated in 2007.

Four people familiar with the matter, who asked not to be named, said that ExxonMobil is evaluating a return to the Petromonagas (Petromonagas, formerly Cerro Negro) project. The project is one of the few assets supporting the operation upgrade device, and can process excess heavy oil into crude oil grades that can be exported. At the same time, the company is also evaluating 3 more blocks in the Orinoco belt, including oil fields that have already been put into operation and are yet to be developed. Since the details of the agreement were kept confidential, the source requested anonymity.

Two sources added that ExxonMobil is also separately negotiating exploration rights for another exploration block.

Whether Russia will continue to participate in the two major projects involving Petromonagas and Petrovictoria (Petrovictoria) in this negotiation is still unknown.

Rosneft (Rosneft) acquired 40% of the shares in Petro Monagas after ExxonMobil's assets were expropriated; in 2020, this share was transferred to the Russian state-owned company Roszarubezhneft. The original purpose of establishing this entity was to evade US sanctions for Moscow's overseas assets.

The Russian government publicly stated that Russia is still an interested party to these two projects and other oil and gas projects in this OPEC oil producing country. Venezuela's oil minister Paula Henao also said this year that the CPC government will fully respect the agreements reached with Russia and China, and that joint venture projects involving Chinese and Russian shares will continue to operate.

ExxonMobil has not publicly disclosed its intended block in Venezuela, nor has it mentioned Russia's shareholding.

Major bargaining chips

ExxonMobil said in a statement on Monday: “This MOU is a significant first step, but any future investment requires stable policies, clear regulatory rules, strong investment protection, and competitive returns.”

In January of this year, shortly after the US ousted then-President Nicolas Maduro from power, ExxonMobil CEO Darren Woods said at the White House meeting that Venezuela “has no investment value yet,” saying that a large number of supporting guarantees are needed to protect long-term investments and avoid further asset expropriation in the future.

After Rodriguez promoted oil reform this year and liberalized the entry threshold for foreign investment, Woods' statement eased somewhat. He said on the company's third-quarter earnings call that progress has been made in terms of fiscal, taxation and legal provisions.

US Secretary of Energy Chris Wright commented on social media this week that ExxonMobil's preliminary agreement was “a huge step forward in a very short period of time.”