CARACAS, April 26 (Reuters) - Venezuela is renegotiating licenses for its natural gas projects to incorporate mixed payments in local currency and U.S. dollars for gas sales, said a gas companies’ union.
The OPEC nation is seeking to improve the viability and profitability of the businesses, in the midst of a major economic crisis in which the local bolivar currency is tanking on the black market.
Venezuela has granted 17 on- and off-shore natural gas licenses, in which state-run PDVSA and foreign companies including Chevron <CVX.N >, Total, Statoil, Repsol, ENI and Gazprom have stakes.
“Now we are trying to renegotiate those licenses so they are profitable,” said Julio Ohep, president of the Venezuelan Association of Gas Processors in an interview.
The union represents state oil company Petroleos de Venezuela SA.
Some project operators receive local currency for gas sales, with prices calculated at the strongest official exchange rate of 10 bolivars per dollar.
On the black market, a dollar can fetch just under 5,000 bolivars in the crisis-hit nation, in which millions struggle with food shortages and a wave of protest is undermining the government of President Nicolas Maduro.
“The purpose of the government is to make gas licenses profitable and this serves as a demonstration to foreign investors that it is a good business,” said Ohep.
He added that the mixed payment in bolivars and dollars would help companies to recover their investment. They do require bolivars to cover local operating costs.
The majority of the gas produced is reinjected by PDVSA into its oil fields, to keep oil production afloat. The country obtains more than 90 percent of its foreign income from oil.
Of the 17 operational gas projects, the most recent to inaugurate offshore production is Cardon IV, in which PDVSA, Repsol and ENI participate.
In Venezuela, private firms are allowed to operate alone on gas projects. However, when commercialization is declared, PDVSA normally enters as a partner and sales must be made to the state oil company.
Venezuela has about 200 trillion cubic feet of proven gas reserves, putting it at eighth place globally. (Writing by Girish Gupta; Editing by Andrew Hay)