Venezuela's heavy crude may cause problems in OPEC compliance

Nov 09, 2001 01:00 AM

The Venezuela's four heavy oil projects may cause problems in OPEC's compliance, some analysts said the country is pumping as much as 10 % over its OPEC quota. Venezuela's the No. 4 world oil exporter's may face a dilemma of staying within quota limits or go in overproduction.

A survey estimated Venezuela's "traditional" crude oil production at 2.7 mm bpd in October, just 30,000 bpd over its official quota, that's no bad for Venezuela's that at one time did not meet over 50 % of its quota. Some analysts say the Orinoco crude's 7.3-9.5 API gravity before upgrading makes it too heavy to qualify for OPEC quotas, which have a 10 API minimum. After processing, to a 25-35 API, it is technically synthetic crude, again outside cartel guidelines, they add. For some private oil executives and experts, the Venezuela's ultra heavy oil production still counts toward OPEC targets.
"Oil is production taking into account the variation up or down of (oil) inventories. This is the quota. All production," ViceMinister of Energy and Mines Bernardo Alvarez said when asked if the Orinoco oil qualifies for the OPEC quota. "All of the heavy oil projects are subject to OPEC cuts... so we are a part of the OPEC quota," said an official from one of the Orinoco projects, which partner foreign firms with state oil company PdVSA.

Venezuelan Energy Minister Alvaro Silva has also confirmed his country's OPEC quota included the Orinoco output. "If the extra-heavy oil is to be counted in Venezuela's crude allotment, by all appearances, they're overproducing by a magnitude of 10 %," ABN AMRO energy analyst Jan Stuart told.
Vice Minister Alvarez has insisted that Venezuela is and will complying with its OPEC's quota. Yet some analysts question how this could be possible if heavy oil is tallied in the calculations.
"The official quota is being observed (by Venezuela) on the crude oil side, but there are other liquids -- up to 400,000 bpd (extra heavy oil plus around 100,000 bpd of natural gas liquids) -- being produced that have not traditionally been counted as part," said Conrad Gerber of tanker tracking firm Petrologistics. Output in October from OPEC's 10 members with quotas was already 770,000 bpd above limits that were put in place in September of 23.2 mm bpd, according to the survey.

However the Orinoco crude is counted, import data from Venezuela's primary market, the United States, suggest it has been receiving more Venezuelan supply, despite a series of quota reductions by OPEC, analysts say. "Exports from Venezuela to the United States are up this year," said Sarah Emerson of Energy Security Analysis.
She said US imports of heavy sour Venezuelan crude were up 250,000 bpd to around 1.295 mm bpd during the first eight months of 2001.s. All the four heavy crude projects are ahead in their plans and will be at full production within the next few years.

Source: Petroleumworld
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