Venezolana de Inversiones y Construcciones Clerico C.A

Un buen Servicio al alcance de todos

Is a general contractor that has been an active participant in the Venezuelan construction industry for over 40 years.

Its professional record and growth are closely associated with the country’s development, having contributed to the construction work of numerous major projects of national importance, in both infrastructure and industrial development, undertaken by the public and private sectors.

1992: investment in the oil industry stars

As a result of the opening of Venezuela’s oil sector to direct outside investment, VINCCLER, C.A. entered this business to take advantage of opportunities offered by the industry’s development plans.

BENTON-VINCCLER, a consortium between Benton Oil and Gas Co. and VINCCLER, C.A. was the first company to make a winning bid for the oil fields tendered under the field reactivation program by the state oil company, Petróleos de Venezuela (PDVSA). This program was called “the 1st round”, and the operating service agreement signed by BENTON-VINCCLER covered fields located in eastern Venezuela.

The BENTON-VINCCLER partnership carried out exploration and production operations in the Uracoa, Bombal and Tucupita fields of the Monagas Sur unit.

1996

Pennzoil Corporation of Pennsylvania and VINCCLER, C.A. signed a 20-year agreement with PDVSA to reactivate the Cumarebo and La Vela fields of the East Falcon unit in western Venezuela, under PDVSA’s “2nd round” field reactivation program.

2000

PetroFalcon Corporation was created to develop oil and gas in western Venezuela. PetroFalcon is a public company listed on the Toronto stock exchange under the ticker symbol PFC. It is engaged in the exploration, development and production of oil and gas in Venezuela through its wholly-owned subsidiary, Vinccler Oil and Gas (VOG), which became 100% owner of the Pennzoil-VINCCLER operating service agreement signed in 1996.

2006

On March 21, 2006, with the approval of the Venezuelan Ministry of Energy and Petroleum, VOG acquired the West Falcon area operating service agreement from Samson International. The West Falcon Block is adjacent to VOG’s existing area of operations in East Falcon, and it straddles the oil and gas pipeline delivery system from Lake Maracaibo to the Paraguana Refining Complex.

On April 1st, 2006, VOG transitioned its East and West Falcon operating service agreements to a 40% equity interest in a new joint venture (“Empresa Mixta”) with PDVSA, called Petrocumarebo, which now holds all the operating rights to the East Falcon and the West Falcon Blocks. As of August 2006, Petrocumarebo’s current production is approximately 1,200 barrels of oil per day and 12 million cubic feet of natural gas per day. Oil and gas production is delivered to the Paraguana Refinery Complex, the largest refining complex in the world, by truck or through the ICO pipeline.

The ICO (“Interconexión Centro Occidente) pipeline, is a 30-inch diameter natural gas pipeline being built by PDVSA. It crosses the Falcon blocks, links them to the Paraguana Refinery, 70 miles to the northwest, and provides ready access to markets for existing and new production. Petrocumarebo is currently the only natural gas supplier to the ICO pipeline.

Petrocumarebo expects to resume onshore drilling to increase production in the beginning of the fourth quarter, 2006.

new business-offshore

On November 15, 2005, PetroFalcon, through Vinccler Oil and Gas, participated in the second round of an offshore lease sale in the Gulf of Venezuela. This shallow body of water, approximately 5 million acres in size, has been thoroughly mapped over the last two decades with a grid of high-quality 2D seismic data. Lying between the oil fields of Lake Maracaibo and the Paraguana Refining Complex, the Gulf of Venezuela is essentially unexplored and is a key element in Venezuela’s future energy plans. Vinccler was announced as the winning bidder on the Castilletes NE II block with its $7.4 million bid. However, for reasons beyond the control of Vinccler Oil and Gas, official awarding of the block has been indefinitely delayed. The government returned the bid bond and granted Vinccler Oil and Gas the exclusive right to reacquire the exploration and production rights when the block again becomes available. In the meantime, the winners of the adjacent blocks; Russia’s Gazprom, Spain’s Repsol and Italy’s ENI, are commencing exploration. In the future, the option could prove to be a valuable asset for PetroFalcon, and management is watching the offsetting exploration activity very closely.

Another set of offshore gas licenses in Venezuela, called Delta Caribe La Blanquilla and Punta Pescador blocks, are now up for bid (August 2006). PetroFalcon, which has proven itself to be competitive against major international companies in bidding, is participating in the current bid process in an effort to add high-potential prospects to its current exploration and development portfolio.

strategy

Independent oil and gas companies like PetroFalcon create value by finding a niche where they have significant competitive advantage, funding their capital programs, and executing their business plans. PetroFalcon’s niche is in knowing how to do business in Venezuela, which has low geological risk.

VOG’s experience in Venezuela shows that governmental agencies conduct business in good faith. New areas in Western Venezuela (e.g., the “Rafael Urdaneta” gas license bidding round) adjacent to the company’s existing assets, and others in Eastern Venezuela (e.g., the “La Blanquilla and Punta Pescador” bidding round), are being offered by the government for exploration and development under the terms of the Gas Law that was introduced in 1999 by President Chávez. These terms include up to a 5-year exploration and 35-year production period, a fixed royalty for the life of the contract, 65% to 100% private ownership of the non-associated gas, and marketing rights. These types of deal terms are rare for any nation, OPEC or otherwise.

This does not mean that VOG’s progress is coming easily. On the contrary, in a country undergoing significant change like Venezuela, negotiating new business is a complicated and delicate process that requires the full talents of our management team. As an example, the Empresa Mixta conversion contract itself has taken over a year to negotiate. However, during that period of time, PDVSA Gas invested over US$ 70 MM in the construction of the ICO gas pipeline to connect to the newly created Empresa Mixta Petrocumarebo fields. For its part, Vinccler Oil and Gas has been investing heavily in the surface equipment, engineering and drilling materials required to ready the fields for production. This is the type of good faith cooperation that results in a long term competitive advantage.

Some companies, like VOG, simply understand what Venezuela needs and offer it. Other companies continue to insist on doing business the way they do in other parts of the world without taking into account the reality of the situation in Venezuela.

It is abundantly clear today that one simply cannot operate a business in Venezuela, export the cash flow and remain indifferent to the surrounding political and social environment. To succeed in Venezuela, PetroFalcon/VOG has to be committed to the country for the long term

On September 10, 2004, PetroFalcon reached an agreement on terms with the International Finance Company (IFC), the commercial arm of the World Bank Group to provide financing of up to $ 36 million for the development of East Falcon. As a result of this financing, the IFC now owns 6% of PetroFalcon. Together with the IFC and the World Bank, PetroFalcon is developing a comprehensive plan with the local communities to bring about the goal of sustainable development and improvement in quality of life for the people of the areas area where Vinccler Oil and Gas operates.

As long as it clearly understands its niche, PetroFalcon, through Vinccler Oil and Gas, will continue to expand its strategic acreage position in Venezuela. It is exactly these types of circumstances where small, agile companies with seasoned management teams build significant value. We believe that the risks in Venezuela are manageable and that the reward opportunities are substantial. It remains PetroFalcon’s goal, as a Venezuelan operator, to become the leading independent producer of oil and gas in Venezuela.