Harvest owns a 32% equity interest in Petrodelta, S.A., an incorporated joint venture between Corporación Venezolana del Petroleo S.A. (“CVP”) (60%), Harvest (32%) and Oil & Gas Technology Consultants (Netherlands) Coöperatie U.A. (“OGTC”), a controlled affiliate of Venezolana de Inversiones y Construcciones Clerico, C.A. (“Vinccler”) (8%). Petrodelta was created in 2007 as a Mixed Oil Company operating under the provisions of the Venezuelan Hydrocarbon Law. Petrodelta is a self-funded operation dedicated to the exploration, appraisal, development and operation of six oil fields located in the east of Venezuela. These six fields are the Uracoa, Bombal and Tucupita fields (which constitute the South Monagas Unit or SMU) and the Temblador, Isleño and El Salto fields. Petrodelta sells its oil to the Venezuelan national oil company.
Before the creation of Petrodelta, Harvest operated the SMU since 1992 through Harvest Vinccler, S.C.A. (Harvest Vinccler), our 80 percent owned Venezuelan subsidiary. Harvest Vinccler operated the SMU for Petroleos de Venezuela S.A. (PDVSA), the Venezuelan national oil company, under an Operating Service Agreement (OSA).
The SMU fields were discovered between 1936 and 1962. The fields were developed and produced until 1987 when they became inactive. When Harvest acquired the rights to the fields in 1992, the fields had produced 73 million barrels of oil and had remaining proved reserves of 18 million barrels. Beginning in 1992, Harvest drilled 181 wells, constructed facilities and produced 113 million barrels of oil and 64 billion cubic feet (Bcf) of gas through April 1, 2006. By April 2006, the SMU fields had remaining proved reserves of 105 million barrels of oil and 133 Bcf of natural gas. Harvest performance since 1992 in the SMU fields resulted in an improvement in ultimate recovery of 220 percent, or 200 million barrels of oil.
With the creation of Petrodelta and the addition of the three new fields to the SMU fields, Harvest and the Venezuelan national oil company agreed upon a business plan to develop and operate the six fields. The plan calls for rapid development of the proved reserve base as well as the appraisal and development of the numerous opportunities associated with the new fields. The intent is to increase production quickly with an early focus on the SMU fields, building on the experience and human and technical resources Harvest Vinccler accumulated during the previous 14 years of operation in the SMU fields.
Currently, Petrodelta’s production has reached 24,000 barrels of oil per day (May 2009). Petrodelta has gross remaining proved reserves of 160 MBbls of oil and 254Bcf of gas as of December 31, 2008. Since its creation, Petrodelta has distributed $234 million in dividends to its shareholders.
A success story: the Conversion Process
During the year 2006, the Venezuelan State embarked in a process to restructure its oil businesses with private partners, which included the conversion of all the pre-existing OSA’s into Mixed Companies.
On March 31, 2006, Harvest Vinccler signed a Memorandum of Understanding (MOU) with PDVSA and Corporacion Venezolana del Petroleo S.A. (CVP) to convert our contractual arrangement governed by the OSA to a Mixed Company.
On August 16, 2006, the parties amended the MOU to provide for the addition of the Isleño, Temblador and El Salto fields to the Mixed Company as additional consideration for our conversion of the OSA to Petrodelta.
The Venezuelan National Assembly approved the formation of Petrodelta and the direct award of the Isleño, Temblador and El Salto fields to Petrodelta on June 12, 2007. Harvest and CVP signed the conversion contract on September 11, 2007. With the publication of the Venezuelan Presidential Transfer Decree in the Official Gazette on October 25, 2007, the conversion process was complete.
With conversion, our business in Venezuela is more substantial and should play to our technical and operational strengths.