Pdvsa readies third marginal fields round

Venezuela's state-owned petroleum company Petroleos de Venezuela SA (Pdvsa) is putting the final touches on its forthcoming third round of bidding for marginal oil fields scheduled for June 2-6 in Caracas.

About 200 private, mostly foreign oil companies were selected to participate in the tender, billed as another major step in Pdvsa's new policy of opening the state oil industry to private investment.

Pdvsa's goal is to jack up Vene- zuela's oil production capacity to about 6.2 million b/d by 2000, twice the current level, in anticipation of an expected surge in world oil demand. That would make Venezuela one of the world's top three oil producers and exporters, a position it has not held for several decades.

Meantime, Pdvsa officials also provided an overview of company operations and updated progress on strategic plans.

Bid round

In the early June tender, 20 fields will be on the auction block.

They are believed to hold enough oil reserves to eventually produce about 600,000 b/d within 10 years. On a short-term basis, the fields are expected to produce about 300,000 b/d, up from the current level of 66,000 b/d.

Contracts granted in the tender are expected to generate about $6 billion of investment.

About 130 of the pre-qualified companies are foreign firms, while the remaining 70 are Venezuelan. Of the international companies, 85 are operating firms and the rest financial organizations. Of the Venezuelan companies, 31 are operating companies and 39 financial organizations.

"The Venezuelan oil industry is growing, and we believe there are numerous opportunities for establishing mixed companies and alliances," said Pdvsa Pres. Luis Giusti, architect of Venezuela's so-called apertura, or oil opening, policy.

The 20 fields, covering about 1.9 million acres, are thought to hold about 3-6 billion bbl of proven light and medium-gravity crude oil reserves.

The fields require advanced technology to bring them up to full production capacity.

Fields, companies

The fields belonging to Pdvsa subsidiaries Lagoven SA, Maraven SA, and Corpoven that are to be included in the third marginal fields round are: La Concepcion, Intercampo Norte, Bachaquero SO (offshore), Mene Grande, Cabimas, LL-652 (offshore), B-2X.68/79, B-2X.70/80, and Ambrosio (offshore) in Zulia state; La Vela Costa Afuera (offshore) in Falcon state; Mata, Caracoles, Maulpa, Kaki, and Dacion in Anzoategui state; and Onado, Boqueron, Acema, Casma, and Anaco in Monagas state.

Among the leading foreign companies prequalified for the tender are Agip SpA, Astra Capsa, ARCO, Braspetro SA, Veba Oel, Coastal Corp., Daewoo Corp., Chevron Corp., China National Petroleum Corp., Enron Corp., Enterprise Oil plc, Exxon Corp., Itochu Corp., Korea Petroleum Development Corp., Louisiana Land & Exploration Co., Benton Oil & Gas Co., Marubeni Corp., Mitsubishi Corp., Mitsui & Co., Mobil Corp., Nippon Oil Corp., Norcen, Phillips Petroleum Co., British Petroleum Co. plc, Elf Aquitaine SA, Texaco Inc., Teikoku Oil Inc., Total, Maxus Energy Co., Unocal Corp., Pennzoil Co., Perez Companc, and Royal Dutch/Shell Group.

Pdvsa already has granted some of those companies operational contracts in previous rounds of bidding for marginal oil fields and has joint ventures with others.

Of about 20 marginal or inactive oil fields that are being tendered in this new round, five will be reserved exclusively for private Venezuelan companies, which represents a unique opportunity for the nation's private sector to participate in upstream activities for the first time, Pdvsa said.

Pdvsa said operational contracts granted thus far in previous tenders to reactivate marginal oil fields generated about $956 million in investments during 1996, and by the close of the year had provided additional production capacity of about 190,000 b/d.

Pdvsa update

Pdvsa is one of the world's leading oil corporations, posting net profits of about $15.47 billion in 1996, up $4.118 billion from 1995.

The company said its average export price for 1996 was $18.39/bbl, up $3.55/bbl from 1995.

"The level of operational activities in the areas of exploration, production, refining, and marketing confirms the sustained development of the country's hydrocarbon resources in the context of a growing world oil demand and a highly competitive market in which producers are seeking to obtain greater benefits through the increase of production capacity combined with the permanent reduction of costs," Pdvsa said.

As a result, the company said Venezuela crude and condensate production capacity in 1996 was 3,416,000 b/d, about 7% above 1995 and a record for the past 25 years.

"Reaching that potential was possible thanks to an intense operational effort to compensate for the natural depletion effects of oil fields where production declines by about 25%/year," Pdvsa said.

The company also said programs involving advanced drilling technology, rehabilitation and infill wells, and secondary recovery efforts along with exploratory work have allowed the country's proven crude oil reserves to increase to 72.574 billion bbl, about 6.246 billion bbl more than in 1995. Gas reserves reached 143 tcf.

Foreign investment

Turning to the recently implemented policy of opening the state oil industry to private investments, Pdvsa said exploration and production profit-sharing contracts were granted for the first time last year, involving an overall investment of about $1 billion.

That investment will have a multiplying effect for the economic recovery of several regions around the country, the company said.

In addition to the marginal fields round, Pdvsa also is pursuing more foreign investment in its upstream oil sector.

During 1996, two more projects for strategic associations to produce and upgrade extra heavy crude from the Orinoco oil belt were secured, Pdvsa reported.

One of those projects calls for Lagoven and Mobil to produce and upgrade about 100,000 b/d of extra-heavy crude from the Cerro Negro area of the belt, while the other project involves Corpoven, ARCO, and Phillips producing and upgrading about 197,000 b/d of extra-heavy crude from the Hamaca area of the belt.

Other strategic associations already in progress include one involving Maraven and Conoco to produce and upgrade 104,000 b/d from the Zuata area of the belt, along with 3,000 tons/day of industrial coke and 200 tons a day of sulfur.

Another project calls for Maraven, Total, Den norske stats oljeselskap AS, and Norsk Hydro AS to produce and upgrade 150,000 b/d of extra-heavy crude, also from the Zuata area, along with 4,900 tons/day of industrial coke and 730 tons/day of sulfur.

In the latest such heavy oil venture, Exxon and Corpoven have signed an agreement to conduct a feasibility study of producing and upgrading extra-heavy crude in Venezuela's Orinoco oil belt.

Under the strategic association, Corpoven and Exxon Services of Venezuela will develop a joint venture to produce and upgrade, in two phases, about 160,000 b/d of extra-heavy crudes from the East Hamaca area of the belt, located south of El Tigre in Anzoategui state, eastern Venezuela. The JV will use Exxon upgrading technology.

This represents the second strategic association in the belt being developed by Corpoven and Exxon. This new Corpoven-Exxon strategic association is to be presented to Congress during second half 1997 for approval.

Regarding the Cristobal Colon liquefied natural gas export project in northeastern Venezuela, covered by a 1994 accord by Lagoven, Shell, Exxon, and Mitsubishi, Pdvsa said studies have been completed to allow a high grade of technical and economic definition.

Considering those studies and the current state of natural gas prices on the international market, the time limit for taking a decision regarding investment has been extended for a period of 5 years, Pdvsa said.

Downstream projects

In the area of refining, Pdvsa said a series of important projects designed to guarantee competitiveness and increase flexibility of the country's refining system were completed in 1996 to handle a larger volume of heavy crudes and reduce the production of residual fuels.

Investments during last year were aimed mainly at completion of the so-called PARC upgrading project at Cardon refinery, the installation of a sulfur recovery unit at Amuay refinery, and catalytic distillation facilities at El Palito refinery.

During 1996, the volume of crude processed in Pdvsa's refining system averaged 2,095,000 b/d, of which 1,205,000 b/d was processed at the Pdvsa-leased Isla refinery at Curacao, 632,000 b/d at Pdvsa-owned refineries in the U.S., and 258,000 b/d at Pdvsa-owned refineries in Europe.

In the area of marketing, Pdvsa said Venezuela sold about 2,752,000 b/d of crude and products on international markets last year, about 215,000 b/d more than in 1995.

Marketing of light and medium grade crudes last year averaged 1,207,000 b/d, an increase of 111,000 b/d, or 9%, from 1995, Pdvsa said.

In an effort to improve the sale of heavy and extra-heavy crudes, Pdvsa placed about 770,000 b/d of these crudes on international markets last year, an increase of 48,000 b/d from 1995.

Of the total 1,977,000 b/d of crude shipped from Venezuela, 1,110,000 b/d went to international clients, 693,000 b/d to Pdvsa ventures abroad, and 174,000 b/d to the Isla refinery.

Refined products sales abroad averaged 775,000 b/d last year, about 57,000 b/d more than in 1995, Pdvsa added.

The U.S. remains the principal market for Pdvsa's crude and products. About 1,631,000 b/d of Venezuelan crude and products went to U.S. markets in 1996, or about 60% of total exports.

Sales to the Caribbean and South American markets averaged 816,000 b/d, about 214,000 b/d more than in 1995.

Brazil alone received about 122,000 b/d of Venezuelan crude and products in 1996, an increase of 18% from 1995.

During last year, oil supplies to the domestic Venezuelan market averaged 650,000 b/d, a decline of 1% from 1995. Of that total, liquid products accounted for 354,000 b/d and natural gas the equivalent of 296,000 b/d.

In the category of liquid products, gasoline consumption declined by 7%, averaging about 183,000 b/d. Diesel sales in 1996 averaged 65,000 b/d, a decline of 4% from 1995, while the sale of liquefied petroleum gas remained stable at 70,000 b/d.

In petrochemicals, Pdvsa unit Pequiven SA posted estimated profits of $268 million, the highest level in its history.

Gross petrochemical output at Pequiven-operated plants averaged 4.4 million metric tons in 1996, in addition to about 3.3 million tons produced at joint ventures, bringing the overall production to 7.7 million tons, or about 1 million tons more than in 1995.

Direct exports by Pequiven and its joint ventures generated revenues of about $774 million, about 20% of the country's non-oil exports.

Pdvsa also reported that in 1996 production of Venezuela's trademark boiler fuel Orimulsion averaged 4.047 million tons, while exports totaled 4.173 million tons.

About 33% of Orimulsion exports went to Denmark, while 24% went to the U.K. Total sales generated gross earnings of $170 million, while net profits totaled about $51 million.

Supply agreements were signed last year with China, as well as with Arawat Cement Ltd. of Barbados, Hokkaido Electric of Japan, SK Power of Denmark, and ENEL of Italy.

In the area of coal, Pdvsa's 1996 production averaged 3.624 million tons, and exports totaled 3.604 million tons. Coal exports generated revenues averaging about $56.6 million in 1996.