VENEZUELA: The first well drilled by US oil major Chevron (NYSE: CVX) on its Cardon III offshore block in the Gulf of Venezuela was dry, an industry source told BNamericas.

The well was recently drilled to a total depth of 9,000 feet (2,743 m), according to the source.

Chevron declined to comment on specific results from the well when contacted by BNamericas. "We are still evaluating the results of Cardon III," a Chevron spokesperson said.

While a dry hole will likely be viewed as a major setback, the Cardon III block is large and could still have large natural gas reserves.

"Such news would mean little relief for western Venezuela's widening gas deficit," an industry analyst said. "But these are also large blocks, so it may take more than one well to conclude that there are no hydrocarbons present."

Chevron said earlier in the year that it would drill one well on Cardon III during 2009, according to a 10-K filed with US securities regulator SEC in February.

The company holds a 100 percent stake in the block, and industry analysts expected the first well to cost around US$30 million. Canadian oil junior PetroFalcon (TSX: PFC) announced in January that it was opting out of its 30 percent share of the well due to market conditions.

Chevron won the block in 2005. European oil majors Repsol YPF (NYSE: REP) and Eni (NYSE: ENI) won the nearby Cardon IV block with 50 percent stakes each.

The blocks are in relatively shallow waters, 30 km (18.6 miles) west of the Paraguaná refinery complex in Venezuela's Falcón state.

Chevron began seismic studies over the Cardon III block in 2007 and secured a jackup rig from Ensco International (NYSE: ESV) last year. Ensco is one of several contractors in Venezuela to suffer recently from payment disputes with Venezuela's state oil company PDVSA.

The rig is expected to be released to Eni and Repsol YPF to spud the first well planned for Cardon IV later this year.

Spokespersons for Eni and Repsol YPF were not immediately available for comment when contacted by BNamericas.

"There is supposed to be a lot of gas offshore in the Gulf of Venezuela that could help power the Paraguaná refinery and the local petrochemical industry," the source said, adding that a lack of details about natural gas pricing and export potential could hamper eventual development if reserves are found.

"Chevron was successful in discovering gas in Plataforma Deltana offshore of eastern Venezuela but has yet to develop it due to similar commercial concerns," the source added.

Besides Cardon III, Chevron has also been exploring for natural gas in two exploratory Plataforma Deltana blocks with working interests of 60 percent in block 2 and 100 percent in block 3, with successful wells drilled in both blocks.

Chevron said earlier in the year that it had completed a conceptual development plan for the Loran field in block 2 that is projected to provide initial supply of natural gas for the Delta Caribe LNG train 1 being developed by PDVSA with multiple international and state-controlled oil companies.

Russian oil giant Gazprom is also drilling for natural gas in the Gulf of Venezuela. The company in 2005 was awarded the Urumaco-1 and Urumaco-2 offshore blocks under Venezuela's Rafael Urdaneta plan to increase natural gas production.

Gazprom said in February that it had started drilling on Urunaco-1 through the UrdanetaGazprom-1 JV the company holds with PDVSA.