Technology, Money Unlocking Vast Orinoco Reserves

L.R. Aalund
Managing Editor-Technology

• Venezuela [129,674 bytes]

Venezuela's hopes to rival Saudi Arabia as the world's most important oil producer moved a big step closer to reality last month with the production of the first joint-venture crude oil from the Faja del Orinoco or Orinoco Belt.

If this and other projects go as announced, nearly 500,000 b/d of upgraded crude will be coming from this region in the next 3-4 years. There are higher production targets farther into the future.

It is primarily the integration of advanced upstream and downstream technology that makes the Orinoco development possible today. As a result, a Journal upstream/downstream editorial team, has devoted much of this issue to a special report on the Orinoco.

While working on this report, this editor encountered at times vague or somewhat contradictory information. This is understandable because the projects are in very early design or planning. Some won't be complete until well into the next century.

But there may now be a degree of uncertainty about the pace of the development.

There have been no official announcements on this but the collapse of the Asian economies and current oil surplus has possibly taken some vigor out of some projects. None of this, however, clouds the view of the grand scheme in progress.

Huge reserve

Technology makes the exploitation of the heavy oil and bitumen in the Orinoco Belt, discovered over 60 years ago, economically feasible. Petroleos de Venezuela S.A. (Pdvsa) has identified 1.8 trillion bbl of heavy and extra heavy oil in place there. Other sources say 1.3 trillion bbl.

The company says that as a result of current projects and technology, 270 billion bbl have been classified as recoverable. This, along with proven reserves of more traditional crude oil, put Venezuela well ahead of Saudi Arabia with its 260 billion bbl of reserves.

Pdvsa estimates that development of the Orinoco Belt will require an investment of $12-13 billion.

Not to be downplayed in the exploitation of this resource is the fact that it is occurring because of an about face in Venezuela's oil policy. It now allows entry into the oil industry there by publicly held foreign companies. They are bringing in money and technology for development of the belt.

Just over 20 years ago the country nationalized the affiliates of international oil companies operating in Venezuela. Subsidiaries of Exxon Corp., Royal Dutch Shell, Standard Oil Co. of California, and others were transformed into 13 Venezuelan companies under the aegis of the state holding company Pdvsa. Most of these have subsequently been consolidated into Pdvsa.

The projects

The "Orinoco Tar Belt," as it was once known, is in eastern Venezuela north of the Orinoco River. The belt is 420 miles (700 km) long by 30-60 miles wide and is in the states of Monagas, Anz?ategui, and Gu rico.

The belt is divided into regions which are shown on the accompanying map. The crude oil produced will be shipped to the Jose industrial district near Barcelona (see map, p. 64) on the Caribbean coast for upgrading and tanker shipment.

Following are highlights on the four confirmed projects in advanced stages. They involve technology described in accompanying articles.

Petrozuata

Petrozuata S.A., a joint venture of Conoco Inc. (50.1%) and Pdvsa (49.9%) is the first Orinoco project to go into production. The company began filling its 125-mile, 36-in. pipeline to the Jose industrial complex on Aug. 30 at a rate of 30,000 b/d of bitumen.

The 9-10° API material is being mixed with Mesa crude as a diluent for transport. A parallel 20-in. line will, after the upgrader is in operation at Jose, return naphtha diluent to the main station in the field for reuse. Thirty-one horizontal wells have been completed and 45 more are in various stages of development. They are in Petrozuata's 55,000-acre production area about 38 miles south of Pariaguan in Anzoategui state.

Production will be increased to 120,000 b/d. The upgrader the company is building (see accompanying article) will lighten the heavy crude to 19-25° API synthetic crude oil. The production rate of the synthetic crude will be 104,000 b/d. Of this, 64,000 b/d will go to Conoco's Lake Charles, La., refinery while 39,000 b/d will go to Pdvsa's Cardon refinery. The upgrader will be completed in the year 2000. The mixed crude will apparently be marketed in the meantime.

The pipeline has extra capacity to transport oil from other companies working in the Orinoco Belt and agreements are being negotiated.

Including the facilities in Jose, the project will cost $2.4 billion.

Cerro Negro

The Cerro Negro project is a joint venture among subsidiaries of Mobil Corp. (41.67%), Pdvsa (41.67%) and Germany's Veba Oel AG (16.66%). The project includes extraction of extra heavy 8.5° API crude from the Cerro Negro region (see map). The crude, mixed with diluent, will be transported to an upgrader at Jose where the gravity will be lifted to 16.5° API in a delayed coking scheme that will produce 105,000 b/d of synthetic crude. Of this, 87,500 b/d will be transported to the joint venture Mobil/Pdvsa Chalmette refinery near New Orleans.

Field production is scheduled to begin next year at a rate of 60,000 b/d and reach 120,000 b/d when the upgrader is completed in 2001. A total of 350 wells will be needed. Total cost of the upstream project is expected to be $1.9 billion or about $1.25/bbl of crude over the project life of 35 years.

Mobil and Pdvsa's portion of the upgraded crude will be refined at their joint venture Chalmette, La., refinery while Veba's share will go to the Ruhr Oel refinery in Germany. This refinery is a joint venture of Pdvsa and Veba.

The entire project will cost $2.5 billion.

Sincor

This past March, J.M. Beuque, senior vice-president of business development for the French company Total, outlined the most ambitious Orinoco project. It is named Sincrudos de Oriente (Sincor). Beuque said that development would start during the second quarter of next year.

Early production at a rate of 40,000 b/d of 8.5° API would begin in November 2000. This crude will be diluted with Mesa crude resulting in a crude of 15-16° API. This will be piped to the coast via the Petrozuata pipeline where it will be marketed internationally until an upgrader is built.

He said 900 horizontal wells would be drilled; 160 for the start-up. The upgrader will go on stream in December 2001.

In February 2002 plans call for production of 160,000 b/d. When the production of extra heavy crude reaches a level of 192,000 b/d. upgrading will produce 169,000 b/d of synthetic crude. Eventually, 204,000 b/d of heavy crude will be produced, permitting upgrading to 180,000 b/d of 32° API high quality synthetic crude.

The heavy crude will then be moved to the coast with a naphtha diliuent.

The project in the Zuata region is headed by Total with a 47% interest. Pdvsa and Norway's Den norske stats olejeselskap a.s. (Statoil) have respectively 38% and 15% interests. In 1997, Norway's Norsk Hydro Produksjon AS held a 15% stake in the project but has subsequently dropped out.

Hydro said before dropping out that Sincor's unit costs (total investment and operating costs divided by the number of produced barrels) was only $5.00/bbl. Hydro said this is low compared to unit costs in offshore recovery. Sincor has estimated reserves of 36 billion bbl and expects to produce 2.4 billion bbl over the lifetime of the project. This will put the recovery rate at about 7%, acccording to Hydro. However, the company believed that this could be raised to 10%. The producing reservoir is only 700 m deep.

The overall investment will amount to $ 4.27 billion, according to Pdvsa.

Hamaca

Pdvsa, ARCO, Phillips Petroleum Co., and Texaco Inc. have formed a consortium known as Petrolera Ameriven S.A. to exploit the heavy crude from the Hamaca region. The interests are Pdvsa and Arco 30% each; Phillips and Texaco 20% each. Initial production of heavy crude will be at a level of 36,000 b/d. This will be mixed with a lighter crude raising the gravity of the mix to 16° API for marketing internationally.

In the first part of 2003, production of heavy crude will be raised to 157,000 b/d. It will be mixed with naphtha for transport to the Jose industrial complex where it will be upgraded to produce 150,000 b/d of 27.5° API crude by conversion and hydrotreating. Estimated investment through this phase will be $3.59 billion. A later phase will lift production of heavy crude to 215,000 b/d.

Others

According to a Pdvsa report earlier this year, three separate Orinoco projects with Exxon Corp., Coastal, and BP had been "defined." This is a step prior to congressional approval in Vene- zuela. None of these was mentioned in an update of projects by Pdvsa.

Hildebrando Martell, Pdvsa exploration and production vice-president working on Orinoco projects, says there is nothing definitive to report on projects other than the four covered in the preceding section. He says the huge amount of investment now going in demands the company's attention. More projects will be defined by the end of this year he said.

Others interested in the Orinoco, according to an earlier Pdvsa report, are Shell International, YPF S.A., Murphy Oil Corp., Marathon Oil Co, Koch Industries Inc., Valero Energy Corp., and Japan National Oil Co.

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