Venezuela's Petroleos de Venezuela SA (PDVSA) and Italy's Eni SPA agreed to establish two joint ventures to produce and refine oil from the Junin 5 block in the Orinoco belt.
"This agreement is the result of 2 years of continuous work between PDVSA and Eni," said the Italian firm's Chief Executive Paolo Scaroni. "Junin is among the blocks with greatest expectations within the very attractive Orinoco belt," he said, adding that the refinery will give the project "greater robustness."
The Junin sector of the Orinoco belt was known as Zuata until PDVSA changed the names of the belt's four main segments in 2005.
Joint ventures
Scaroni and PDVSA Pres. Rafael Ramirez agreed to form separate JVs to extract and refine the heavy crude found in the 424-sq km Junin 5 block, with PDVSA taking 60% and Eni 40% of each venture.
One JV is to produce 75,000 b/d of oil in 2014. When production eventually reaches 240,000 b/d, the second JV will build a refinery at the Jose Industrial Complex.
PDVSA said the arrangements, which must be approved by Venezuela's National Assembly as well as the two companies' boards, will be signed in Caracas on Jan. 26.
Last December, China and Venezuela signed five similar agreements, one concerning refining and two touching on exploration and development of oil fields in the Orinoco belt (OGJ Online, Dec. 30, 2009).
Last November, Ramirez—who also serves as Venezuela's minister of oil—told the third World Congress on Heavy Oil that certified crude reserves in the Orinoco belt are expected to reach 235.6 billion bbl by the third quarter of 2010 and its total reserves 316 billion bbl.
Ramirez said the Orinoco belt is producing more than 532,000 b/d of 16-32° gravity oil, and he highlighted several projects aimed at increasing production.
In particular, the minister mentioned a consortium of Russian companies and PDVSA that aims to produce 450,000 b/d from Junin 6; a JV with CNPC that will produce 400,000 b/d from Junin 4; and a project with Petrovietnam at Junin 2 expected to produce 200,000 b/d.
Vast potential
According to analyst IHS Global Insight, few would argue with the huge production potential offered by Venezuela' heavy oil reserves and the promise of new investment from foreign companies should result in higher production volumes in the coming years.
"However, the Venezuelan government' production forecasts have been overoptimistic in the past, and it remains to be seen whether its choice of business model and partners is best suited to meet its ambitious goal of 6.862 million b/d production capacity by 2021," the analyst said.
Baker Hughes indicates that overall drilling in Venezuela has declined as it has in many areas of the world the past 18 months. After averaging 80 rigs/month in January-November 2008, the country averaged 61 rigs/month in January-November 2009. Baker Hughes drilling figures include rigs working in the Orinoco belt.
Venezuelan President Hugo Chavez's administration nationalized four Orinoco heavy oil projects in 2007. PDVSA was in arrears on payments to various drilling contractors in 2009, and the administration seized the assets of some foreign and domestic drilling contractors in mid-2009.
The 12,000-sq km Orinoco belt is comprised of four main areas: from west to east, they are Boyaca, Junin, Ayacucho, and Carabobo, with each main area subdivided into 27 blocks (see map, OGJ, Nov. 21, 2005, p. 54).
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