Mobil, PDVSA Complete $900 Million Financing

18 June 1998

Mobil, PDVSA Complete $900 Million Financing for Cerro Negro Oil Project in Venezuela

    FAIRFAX, Va.--June 18, 1998--Mobil Corporation and Petroleos de Venezuela S.A. (PDVSA) announced today that their affiliates, Mobil Cerro Negro, Ltd. and PDVSA Cerro Negro, S.A., have successfully completed a $900-million limited recourse financing for the Cerro Negro heavy-oil project in Venezuela.
    $600 million has been raised through three tranches of bonds (including a 30-year tranche which is the longest ever for an emerging markets project financing). Another $300 million will come from a commercial bank facility.
    The completion of the financing marks the final step in the approval process for construction of the project.
    The Cerro Negro Project is a joint venture among affiliates of Mobil (41.67 percent interest), PDVSA (41.67 percent interest) and Veba Oel (16.66 percent interest). The project includes extraction of extra-heavy crude oil (8.5 degree API) from the Cerro Negro field and transportation by pipeline to an upgrader to be constructed at Jose on the coast of Venezuela, which will process the extra-heavy crude into synthetic crude oil of approximately 16.5 degree API.
    Production is scheduled to begin in 1999 at a rate of 60 thousand barrels per day (TBD) reaching 120 TBD once the upgrader is completed in mid-2001. The total cost of the upstream portion of the project and the upgrader in Venezuela through project completion is expected to be $1.9 billion, or about $1.25 per barrel of oil to be produced over the project's life.
    The project life covers 35 years from the commencement of commercial production. The project will provide access to a very long-term stable production stream that will total about 1.5 billion barrels over the life of the project. Mobil and PDVSA's share of production will be transported to the Chalmette, Lousisiana, refinery, jointly owned (50/50) by affiliates of Mobil and PDVSA.
    Veba's share of the syncrude will be transported to the Ruhr Oel refinery system in Germany, which is a joint venture of PDVSA and Veba.
    Claus Graf, President of PDVSA Exploration and Production, pointed out that the completion of the financing for the Cerro Negro Project evidences the confidence of international oil companies and the financial community in the Venezuelan oil business. The project is part of Venezuela's long-term development plan to expand the country's oil production capacity and to open the oil sector to private sector participants.
    "With the financing successfully completed for this world- scale project, Mobil looks forward to developing this major hydrocarbon resource which will provide long-term strategic value to Mobil's worldwide portfolio by providing access to economically attractive production for the future," said Lou Allstadt, President, Mobil's Americas Exploration & Producing.
    "With Mobil's and PDVSA's shared interest in the Chalmette Refinery, both companies are well positioned from production of the extra heavy oil through all phases of refinery processing."
    Mobil's other activities in Venezuela, include oil production in the Quiamare block, oil exploration in the La Ceiba block, fuels and lubes marketing and a 50/50 joint venture under study with Pequiven, the petrochemicals affiliate of PDVSA, for a $2 billion olefins plant at Jose.