UPDATE 2-Venezuela softens Carabobo oil bid terms - source

Promised lower taxes, other sweeteners all included

* Also extends payment time for starting bonus (Adds company comment)

CARACAS, Nov 30 (Reuters) - Venezuela has slightly softened conditions for the auction of its Carabobo oil project and is due to deliver the finalized terms to interested companies later on Monday, a government source said.

Worried by lukewarm private sector interest in its first oil auction in more than a decade, Venezuela last month said it was lowering taxes and extending the production timeline for the project.

The revised conditions include all the previously announced sweeteners such as lower royalties, along with new incentives such as a longer period to pay starting bonuses for the project, the source, who has knowledge of the process, told Reuters.

The government may also be willing to soften a tough tax on windfall profits when prices are high.

"There is an intention to soften or remove the windfall tax, but that will not be included in the terms," the source said.

The local manager of one of the companies considering taking part in Carabobo said the windfall tax limited the attractiveness of the project, even with royalties reduced to 20 from 30 percent.

"In some stages of the project the return is minimal, WTI crude is expected to hold between $70 and $100 per barrel during the project's life, meaning the windfall tax is applied," he said.

The windfall tax is activated when oil prices rise above an average of $70 per barrel during one month.

Companies including Britain's BP (BP.L: 行情) and U.S.-based Chevron (CVX.N: 行情) have been waiting for weeks for the final version of the terms, the first improvement in conditions for private oil under socialist President Hugo Chavez.

The massive heavy crude project will involve seven areas, each of which is expected to require an investment of between $10 billion and $20 billion. The goal is to raise Venezuela oil output by 1.2 million barrels per day by 2015.

Other companies interested in the auction for minority interests in the three Carabobo joint-ventures include China's state oil company CNPC, France's Total (TOTF.PA: 行情), Italy's ENI (ENI.MI: 行情) and Portugal's Galp Energia (GALP.LS: 行情), as well as consortiums of Russian and Japanese businesses. [ID:nN06184958].

Source: reuters.com/