Venezuela pinned a great deal of hope on the country’s Orinoco Belt for expanding its output. Things aren’t going as planned, as Caracas correspondent Mery Mogollon explains in this week’s Oilgram News column, At the Wellhead.
The long-term prospects for Venezuela as an oil exporter are focused on the giant complex of oil fields known as the Orinoco Belt, which extends over more than 55,000 square kilometers in the southeastern part of the country and have proven and probable reserves thought to exceed 220 billion barrels.
The problem has been that new joint ventures since 2005 between state-owned PDVSA with foreign minority partners to exploit those reserves has not advanced at the hoped-for pace. The initial target for the JV’s was to reach one million b/d by 2013, but production levels have only hit a stunningly low 6,000 b/d.
Meanwhile, construction of new upgraders, also known as improvers, needed to make the additional heavy crude transportable, has now been put off until 2020.
This delay in the business plan has obliged PDVSA to make an abrupt turnabout in its short-term strategy to increase oil output.
Now the state oil company is looking for partners with financing to expand the combined capacity of four existing upgraders to 816,000 b/d from the current 630,000 b/d. These upgraders were built under the old vehicle of “strategic partnerships” with foreign companies in the 1990s. PDVSA also wants to expand to 140,000 b/d from 90,000 b/d the capacity of the oil mixing facility that it operates in partnership with CNPC of China under an agreement in which PDVSA received a $4 billion loan in 2013.
Under terms of a proposal that PDVSA has pitched to several different companies, the existing structures would be improved and enlarged, with an investment of about $23 billion through 2019, of which $3 billion would go to the existing upgraders and the rest to expand production facilities to produce and transport extra heavy crude to the plants where it would be upgraded.
Foreign companies that in November heard details of the plan included Chevron, Total, Eni, Repsol, Rosneft and CNPC.
The improvers to be expanded include:
Petroanzoátegui (100% owned by PDVSA) to be expanded to 160,000 b/d from the current 120,000 b/d;
Petrocedeño (PDVSA owns 60%, TOTAL 30.3% and Statoil 9.7%) to 250,000 b/d from 200,000 b/d;
Petromonagas (PDVSA owns 83.7%, Rosneft 16.3%) to 158,000 b/d from 120,000 b/d);
Petropiar (PDVSA owns 70%, Chevron 30%) to 248,000 b/d from 190,000 b/d;
Sinovensa oil mixing facility (PDVSA owns 60% and CNPC 40%) to 140,000 b/d from 90,000 b/d.
Until now, international oil companies have made no public statements about these expansion proposals regarding the existing upgraders, while doubts persist that PDVSA might still build six new upgraders to convert the Faja’s heavy crudes into a more commercial grade of crude.
Industry analyst Diego Gonzalez, however, considers the idea of constructing new upgraders to be unworkable, and he is not alone.
PDVSA’s timeline for the construction of six new improvers, when added to the four existing ones that it wants to expand, would imply adding two million b/d of production to support the overall goal of six million b/d of output by 2019.
“The tragedy of the new improvers is not the cost. PDVSA plans to locate the improvers along the Orinoco River in Soledad and Mapire, which would be crazy because it doesn’t make sense to ship the crude for improvement 200 kilometers from the fields and then return it back again to the deepwater port that PDVSA plans to build in the Gulf of Cariaco east of Cumana, another 400 kilometers away,” Gonzalez said.
But other economists see the most urgent and immediate problem of PDVSA as how to stop the fall in oil output.
“Sources in international trade indicate a declining production and export trend in light and medium crudes, compensated for partially with higher production of extra heavy crudes in the existing Orinoco Belt consortiums…but without new capacity of 200,000 b/d for each upgrader for these additional crudes which is needed to elevate their value and international prices of Venezuela’s oil basket,” according to a document issued Jan. 31 and signed by 47 economists including Pedro Palma, Orlando Ochoa, Angel Garcia, Asdrubal Oliveros, Jose Guerra and Luis Carlos Palacios.
“PDVSA produced in 2013 on average about 2,645,000 b/d of crude, and 100,000 b/d of condensates—that is, less than half of the goal set in 2006. In 2013, production fell 1.7% from 2012, and exports over the same period fell 6.4% to 1,928,000 b/d,” according to the report.
In November, during a meeting of Russian oil companies on Venezuela’s Margarita Island, PDVSA president Rafael Ramirez recognized the problem and laid out the solution to solve it.
“We have a plan that will ease the bottleneck at the existing upgraders. We are going to install naphtha eliminators. At the moment we are selling high volumes of crude (diluted) with naphtha simply because we are producing more extra heavy crude in the Orinoco Belt.”