Venezuela's LNG export project is back on track, albeit in a scaled-down version.
Petroleos de Venezuela SA (PDVSA), Royal Dutch/Shell, ExxonMobil Corp., and Mitsubishi Corp. have signed a memorandum of understanding to develop a $2 billion LNG project in northeastern Venezuela.
The project will be known as Project Venezuela Liquefied Natural Gas (PVLNG) and will have a production capacity of about 4 million tonnes/ year.
The venture is a downsized version of the so-called Cristobal Colon project, which involved the same four partners (but just Exxon Corp. prior to its acquisition of Mobil Corp.). That project, which called for an investment of more than $5 billion and an estimated output capacity of as much as 6 million tonnes, was shelved over poor economics.
The new, smaller-scale PVLNG will tap vast gas reserves in fields in the Gulf of Paria, off Venezuela's northeastern coast in the Caribbean Sea. It is expected to go on stream with its first exports in 2005 to markets in the Caribbean and the US East Coast. According to industry sources, PDVSA subsidiary PDVSA Gas may hold a 33% stake in the venture, with remaining interests held by Shell 30%, ExxonMobil 29%, and Mitsubishi 8%.
Background
Venezuela had been considering an LNG export project for most of the past decade, getting a green light from Venezuela's Congress in 1996 after about 4 years of discussion (OGJ, Dec. 9, 1996, p. 28).
In that incarnation, the project was estimated to cost $5.6 billion and have the same interest split as the current version. LNG exports were to target the US Northeast and Europe. Gas supplies were to come from four gas fields to be developed in the Caribbean north of the Paria Peninsula, transported to shore by two pipelines, one 45 km and the other 32 km. PDVSA discovered Rio Caribe, Mejillones, Patao, and Dragon fields in 1978-82. The partners later confirmed the presence of 11 tcf of gas reserves.
The gas was to feed a 6 million tonne/year capacity liquefaction plant near Mapire on the peninsula's southern shore. Final cost of the project would have depended on whether the group purchased or leased five or six 50,000-dwt LNG carriers, among other factors.
If this plan had proceeded as planned, exports would have begun in 1999 or 2000.
The project was put on indefinite hold the same year it won congressional approval (OGJ, Dec. 8, 1996, News- letter). At that time, PDVSA said the project needed at least a 10% rate of return in real terms vs. a projected ROR of about 10-12% (including a margin of error).
As part of an ambitious gas infrastructure development program under the administration of President Hugo Chávez, PDVSA revived talks on the LNG project with the other three companies earlier this year (OGJ, Jan. 31, 2000, Newsletter).
