Venezuela's congress has approved two heavy oil projects involving foreign investors and a combined cost of more than $4.8 billion.
The surprise, last minute vote came only 3 days after the congress approved the $5.6 billion Cristobal Colon liquefied natural gas export project, representing the biggest energy project in Venezuela's history and the first direct equity investment by foreign companies in the country's upstream petroleum sector since nationalization in 1976 (OGJ, Aug. 16, p. 28).
Approved Aug. 13 are projects proposed by ventures of a Petroleos de Venezuela SA (Pdvsa) unit with Conoco Inc. and a group led by Total calling for developing and upgrading extra heavy crude from Venezuela's Orinoco belt and marketing products.
HEAVY OIL STRATEGY
Venezuela has the world's largest accumulation of extra heavy crude and bitumen in the Orinoco belt, as well as substantial reserves of conventional heavy crude. The state company sees associations with foreign multinational companies as key to its strategy to commercialize its heavy oil resource. Essentially, Pdvsa has a two pronged heavy oil strategy:
- Upgrading the extra heavy, high sulfur crude to a lighter gravity, low sulfur crude through delayed coking, desulfurization, and severe conversion processes.
- Direct sales as Orimulsion, a boiler fuel that contains an emulsion of 70% bitumen and 30% water with a surfactant.
Meantime, Pdvsa unit Lagoven SA is negotiating with Germany's Veba Oel about another heavy oil upgrading project, to cost $3-3.5 billion, that would incorporate Veba's Combi-Cracking process. Pdvsa and Veba currently are partners in a large oil refining/marketing and petrochemical venture in Germany.
Pdvsa expects such projects will add as much as 360,000 b/d to Venezuela's oil production by 2002.
TOTAL PROJECT
A joint venture of Total 40%, Maraven 35%, and a combine of Itochu Corp. and Marubeni Corp. 25% plans a project estimated to cost more than $3.1 billion that would produce 114,000 b/d of 9 gravity, high sulfur crude from the Zuata region of the Orinoco belt in Anzoategui state.
The venture would use delayed coking and hydrodesulfurization processes in Venezuela to yield 100,000 b/d of 31 gravity, 0.06 wt % sulfur content crude.
The extra heavy crude would be transported via a 210 km pipeline to a delayed coking plant to be built near the Caribbean port of Jose, site of existing petrochemical and gas processing plants.
The partners would place the crude on international markets and sell 3,000 tons/day of petroleum coke resulting from the upgrading to Conoco unit Louisiana Carbon and a combine of Pdvsa unit Citgo Corp. and Thyssen AG.
Maraven said the equity shares in both heavy oil projects could change if new partners came on board. Ste. Nationale Elf Aquitaine reportedly has discussed such participation with partners in the Total group.
CONOCO PROJECT
A joint venture of Conoco 49.9% and Maraven SA 49.9% plans a $1.7 billion project to produce 120,000 b/d of 9 gravity, 3.7 wt % sulfur content crude, also from the Zuata region.
The venture would use delayed coking to yield about 102,000 b/d of 20 gravity, 2.7 wt % sulfur crude.
The partners would place total output with Conoco refineries at Lake Charles, La., and Ponca City, Okla.
The project also calls for selling 3,000 metric tons/day of petroleum coke to Louisiana Carbon under a long term contract.
Maraven will not hold more than 49.9% interest in the Conoco project and currently plans to sell the remaining 0.2% to a "financial" partner, probably a bank.
It's likely the two groups will seek cooperation on the pipeline as well as other synergies in port and storage facilities.
Orinoco wells are only about 2,000 ft deep and feature high reservoir temperatures and low viscosity, allowing recovery with standard pumping units. Wells are highly productive, with steam soaking boosting production rates from a typical 500 b/d to about 1,500 b/d.
The projects also will benefit from a lower tax rate they would be eligible for, 30%, reserved for private Venezuelan companies such as the joint ventures. Pdvsa pays the state a combined tax take of more than 80%.
Congressional approval was the last legal hurdle for the two projects. Venezuelan law requires any joint venture in oil and gas between Pdvsa and a private company must be approved by both houses of congress.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.
