Lagniappe

 

 

Todd Bensman:

Robert Bryce : Energy Tribune speaks a
with PetroFalcon's Clarence Cottman

 

Other oil companies may be leaving Venezuela, but PetroFalcon, with the largest private acreage position in the country, is staying put. In fact, as PetroFalcon’s vice chairman Clarence (Clancy) Cottman sees it, there are far more reasons to stay in Venezuela than to leave.

Cottman, with a B.A. from the Rochester Institute of Technology and an M.B.A. from the University of Rhode Island, has more than 25 years of experience in the oil and gas business. He began his career at Sun Company and was later an executive officer of Benton Oil and Gas Company. He has worked in several foreign countries and has been in Venezuela since 1992. As its CFO he helped start PetroFalcon in 2000, taking it public on the Toronto Stock Exchange in 2003and becoming vice chairman in December 2006. He exchanged e-mails with Robert Bryce in mid-October.

ET: ExxonMobil and other countries are pulling out of Venezuela. But PetroFalcon is expanding. How was PetroFalcon able to amass such a large onshore concession (1.6 million acres, which is second only to PDVSA) in Venezuela?

CC: Our strategy has always been to trade geological risk for perceived political risk. By that, I mean we know Venezuela has the reserves, and we know that building an acreage position there can be very valuable. We have been able to expand over and over by negotiating agreements effectively with the government and purchasing reserves and production at a discount to international metrics.

For example, we negotiated the first operating service agreement in Venezuela in the 1990s with the Benton-Vinccler joint venture, which is now owned by Harvest Natural Resources. We took production from zero to 50,000 barrels of oil per day very quickly. My partner Bill Gumma and I sold out, and convinced our Venezuelan partner, Juan Francisco Clerico, to purchase another operating service agreement for the East Falcon Block in 2000. We subsequently purchased the West Falcon Block from Samson International in 2006 and then, earlier this year, farmed in to Chevron’s Cardon III offshore natural gas exploration license in the nearby Gulf of Venezuela. Just recently, we announced the acquisition of Lundin Petroleum’s interest in the Colon Block.

We are the only company that has received ministry approval to complete a [merger and acquisition] transaction in Venezuela over the last couple of years, and we believe we can continue to consolidate assets in the region at a discount because we are 100 percent focused on Venezuela.

ET: What are PetroFalcon’s proved and probable reserves in Venezuela?

CC: PetroFalcon has existing proven and probable reserves before royalties of 36 million barrels of oil equivalent as of January 1, 2007. This is entirely from our joint venture with PDVSA, PetroCumarebo, and does not include the recently announced acquisition of Lundin’s equity interest in another PDVSA joint venture, Baripetrol.

ET: At the Pacesetters conference sponsored by John S. Herold and held in Greenwich, Connecticut in September, you said that operating in Venezuela is a “marathon, not a sprint.” Are other companies not looking far enough into the future?

CC: You have the full spectrum in Venezuela. Some companies are unable to adapt to the new circumstances or have non-core assets in Venezuela, and are therefore leaving the country. But you also have companies, like our partner Chevron, that are adapting very well and making long-term commitments to the country. We are a small local company with 100 percent of our business here and so we have to be more flexible than most of the oil and gas companies doing business in Venezuela.

Robert Bryce is the managing editor of Energy Tribune. He is the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate. He can be reached (robert@robertbryce.com). Petroleumworld does not necessarily share these views.

Editor's note: This commentary was originally published by Energy Tribune, on 12/19/2007. Petroleumworld reprint this article in the interest of our readers. Petroleumworld does not necessarily share these views.

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Petroleumworld News 12/21/07

Copyright© 2007 Robert Bryce. All rights reserved.

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