We have operated in Venezuela since 1992 through Harvest Vinccler, S.C.A. (Harvest Vinccler), our 80 percent owned Venezuelan subsidiary. Harvest Vinccler operates the South Monagas Unit (SMU) with Petroleos de Venezuela S.A. (PDVSA). SMU includes the Uracoa, Bombal and Tucupita fields. The SMU fields were discovered between 1936 and 1962. The fields were developed and produced until 1987 when they were abandoned by PDVSA. When Harvest acquired the rights to the fields in 1992, the fields had produced 73 million barrels of oil and has 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. At 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.
On March 31, 2006, Harvest Vinccler signed a Memorandum of Understanding (MOU) with PDVSA and Corporación Venezolana del Petroleo S.A. (CVP) to convert our contractual arrangement governed by the OSA to a mixed company. The MOU included a draft conversion contract which defined the terms and conditions of the migration to the mixed company, the mixed company charter and the mixed company by-laws. These documents provide that upon completion of the conversion:
- Harvest and CVP will form a company in which an 80 percent owned affiliate of Harvest will own 40 percent of Petrodelta and CVP will own the remaining 60 percent. Consequently after the conversion, Harvest will own a net 32 percent of Petrodelta. An affiliate of our Venezuelan partner will indirectly own a net 8 percent of Petrodelta;
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 mixed company, Petrodelta, will engage in the exploration, production, gathering, transportation and storage of oil and gas from the SMU fields as well as the Isleño, Temblador and El Salto fields.
Harvest Vinccler and CVP have agreed upon a business plan to develop and operate the six fields. It envisions 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 build production quickly with an early focus on the SMU fields. The business plan calls for two drilling rigs and one workover rig to begin drilling in the SMU fields and a third drilling rig and a second workover rig for the three new fields. In addition, the business plan calls for the shooting of three-dimensional seismic over the Isleño fields and a portion of the El Salto field. The three-dimensional seismic currently available over the Temblador field and a portion of the El Salto field will be reprocessed.
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 will be more substantial and should play to our technical and operational strengths.