Venezuela touts gas potential to prospective investors

Venezuela wants to see $50-55 billion invested in its oil, gas, refining, chemical, and other hydrocarbon operations over the next 10 years, with a primary emphasis on developing its nonassociated gas reserves. Petroleos de Venezuela SA, the national oil company, will contribute 42% of that amount, including $500 million over the next 2 years to explore for light oil.


Sam Fletcher
OGJ Online

Venezuela is trying to recruit US and other companies for an aggressive exploration and production program aimed at developing the virtually untouched nonassociated natural gas reserves in that country. During recent meetings with industry representatives in Houston, Venezuelan officials described key areas of high gas potential.

Venezuela wants to see $50-55 billion invested in its oil, gas, refining, chemical, and other hydrocarbon operations over the next 10 years, with a primary emphasis on developing its nonassociated gas reserves. Petroleos de Venezuela SA, the national oil company, will contribute 42% of that amount, including $500 million over the next 2 years to explore for light oil. Its PDVSA Gas division has shifted its emphasis from gas operations to marketing.

The rest of that target investment is to come from private investors, both inside the country and abroad.

Venezuelan officials are inviting qualified private investors�both national and foreign�to explore for and produce nonassociated gas in that country "on their own account and at their own risk." Moreover, those entrepreneurs must also find markets�either internal or external�for the gas they discover.

Yet PDVSA is to retain production of all associated gas, with proven reserves totaling about 146.6 tcf, current production 6 bcf/d, and gas pipelines 5,000 km. That makes PDVSA a formidable competitor in that market.

However, Venezuelan officials say gas is the fastest-growing fuel in South America. They want to increase both Venezuela's internal consumption and its exports of gas.

Gas potential
Venezuela has the largest proven gas reserves in Latin America and the seventh largest worldwide, just behind the US. But, because it produces only associated gas, its gas market is entirely dependent on its oil production.

Venezuelan officials say they have identified several highly attractive areas of nonassociated gas both on land and offshore. Four land areas are being offered in the first licensing round this summer:

� Yacal Placer was discovered during the 1960s and partially developed in the 1970s and '80s with 29 exploration and development wells and some 2D seismic. Proven gas reserves are estimated at 2 tcf, but Venezuelan officials say application of 3D seismic and new drilling technology could increase those reserves by 3 tcf. The field is less than 20 km from existing transmission systems, so production could quickly reach commercial levels, officials said.

� The foothills area of Venezuela's coastal mountain range, covering some 12,000 sq km, is being divided into several exploratory blocks of 1,000-2,000 sq km. There is little seismic or drilling data on that area, but regional geography suggests "a highly prospective level" for commercial gas development at less than 12,000 ft, officials said. Those blocks also are near existing transmission systems and consumer centers, which officials claim should speed development.

� Barrancas, on the Andean southern flank, is far from Venezuela's traditional gas sources. However, in 1994-96 PDVSA drilled various exploratory wells in that area, including three gas discoveries. Officials want outside investors to delineate those discoveries and explore other prospects. They say Barrancas' remote location means area demand for gas "is likely to be quite appreciable in the medium term."

� North Ambrosio is a "highly prospective" gas area in the immediate vicinity of the Maracaibo basin. That area is to be split into 2 blocks of 1,000 sq km each.

Venezuelan officials said they are still on track with tax reforms and other policy changes they outlined in similar meetings earlier this year and in late 1999. But industry analysts say US investors, disappointed by earlier political and financial failures in that country, will take a wait-and-see approach, at least until after Venezuela's national elections later this year.

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