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Petrozuata

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THE CASE STUDY OF PETROZUATA

The case of Petrozuata
Petrozuata is a joint venture between Conoco, then part of DuPont, and Maraven, a subsidiary of Petróleos de Venezuela S.A. (PDVSA), Venezuela’s national oil company. It is the first in a series of development projects that are aimed at “re-opening” the Venezuelan oil sector to foreign investment.
The project consists of three key components
-Production of heavy oil from a new field in Venezuela’s interior
-Transportation of the oil to coast via pipeline
-Transportation of oil to refineries along the US Gulf Coast
Once refined, the syncrude would be sold at market prices to Conoco under a DuPont-guaranteed off-take agreement. At the end of this 35-year purchasing agreement, Conoco will transfer its shares to Maraven at no cost. The sponsors agreed to use 40% of equity (40%) and 60% of debt to finance the project’s $2.425 billion total cost.
The financial advisors, Citicorp and Credit Suisse First Boston, used a multi-pronged financing strategy to raise debt from commercial banks, development agencies, and bond investors. In the end, the sponsors raised $450 million in bank finance and $1 billion in Rule 144A bonds, all of which was non-recourse to the sponsors following completion of the project.
The decision to finance this deal on a project basis was actually a dual decision regarding both financial and organizational structure. Risks analysis
The purpose of this paper is to analyze how the sponsors allocated both contractual and residual risk in the Petrozuata deal. There are four general categories of risk: precompletion risks, operating risks, sovereign risks, and financing risks, but in this paper I will talk just about the last two risks, as being principal part of my contribution to the group case analysis, so here I am going to present the information found that I used while...

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