Caracas, Venezuela: India's energy giant, the Oil & Natural Gas Corp (ONGC) has won a joint bid to develop a crude oil block in Venezuela's Orinoco Belt as part of a consortium with Spain's Repsol and Malaysia's Petronas. Indian Oil Corp and Oil India Ltd, are other minor stakeholders in the block.

Orinoco Belt - Image: Conoco Phillips

ONGC will develop the Carabobo block 1 with Spain's Repsol YPF SA, Malaysia's Petroliam Nasional Bhd., Indian Oil Corp. and Oil India Ltd., Venezuelan oil minister Rafael Ramirez said in Caracas today when he announced the winning bids at a ceremony in the presidential palace.

Carabobo block 1 is a vast area that holds an estimated 235 billion barrels of reserves of heavy and ultra-heavy oil.

The consortium offered state-owned Petroleos de Venezuela (PDVSA) a 1.05-billion-dollar loan and a bond of the same amount.

Chevron was awarded Carabobo block 3, with Japan's Impex and Mistubishi alongside Venezuelan firm Suelopetrol, Ramirez said. The Chevron consortium offered PDVSA a billion-dollar loan, and will pay a bond of 500 million dollars.

Block 2 was not awarded and could be on offer "during another procedure," Ramirez said.

Initial production in the two blocks could reach 400,000 barrels per day, with all blocks put together having a potential production of 1.2 million barrels per day

PDVSA will hold a 60-per cent stake in the Carabobo block 1, with Repsol, Petronas and ONGC each holding 11 per cent. The other two Indian companies, IOC and OIL, split the remaining seven per cent.

Venezuela currently has proven reserves of 142.3 billion barrels of oil and development of the Orinoco belt will allow it to increase that amount to 316 billion barrels.

Analysts say that producing oil from the Carabobo block will be a difficult and expensive proposition as it is a heavy oil field. The Orinoco Belt has the world's largest accumulation of heavy and ultra heavy oil.

Heavy crude oil or extra heavy crude oil is any type of crude oil which does not flow easily. It is referred to as "heavy" because its density or specific gravity is higher than that of light crude oil. This mostly results from crude oil getting degraded by being exposed to bacteria, water or air resulting in the loss of its lighter fractions while leaving behind its heavier fractions.

According to state oil company, PDVSA, the block may require an initial investment of $9 billion and total investments of as much as $19 billion over 25 years.

ONGC produces more than 75 per cent of India's domestic crude output and has increasingly sought assets abroad, even as domestic output remains stagnant or weakens. It bought Imperial Energy Plc for $2.2 billion last year to gain access to fields in Russia.