PdVSA to stop producing orimulsion

Jul 07, 2004 02:00 AM

The Venezuelan oil company PdVSA is considering the possibility of selling to Orifuel Sinovensa -- a company formed by Bitor, China National Oil and Gas Exploration and Development Corporation and PetroChina Fuel Oil -- the first orimulsion plant that is operating. The construction of a second orimulsion plant, which would be added to the 6.5 mm tons of the first plant, was delayed due to Venezuela’s government decision to stop production of orimulsion and its negotiations with the Chinese companies, clients of the orimulsion.
Venezuela has stopped producing its orimulsion fuel, a bitumen or coal substitute that has been successfully used to fire power plants in Canada and Europe and which has been a hit in China. The orimulsion "won't be produced anymore. It was not a profitable business venture, and we have to put an end to these kinds of projects," said Venezuelan Energy Minister Rafael Ramirez.

PdVSA signed an agreement with the Chinese government to produce 6.5 mm tpy of the fuel in Venezuela for China to use in thermal plants and steel mills. In August of 2003 the company reached an agreement with a South Korean consortium to supply that country with another 6.5 mm tons of orimulsion a year.
But the government has made a decision to stop producing the fuel "orimulsion does not pay," said PdVSA president Ali Rodriguez. Adding "it's a bad business deal for Venezuela, because it can be sold at just four dollars a barrel," compared to $ 30 a barrel for reformed oil.

One of the principal clients of orimulsion, New Brunswick Power in Canada, is suing PdVSA in a New York court to pay $ 2 bn if does not supply the contracted orimulsion for its new orimulsion reformulated plant. PdVSA said that negotiations were in course with New Brunswick power to an agreement on the orimulsion delivery.
Ramirez said that by selling orimulsion at $ 4.60 a barrel last year, Venezuela lost $ 12.30 a barrel compared to what it could have charged for extra heavy oil mixed with other crudes and reformed into synthetic type of fuels like merey 30, sold by joint venture Sincor.

However, Venezuelan well-known experts like Anibal R. Martinez, a former OPEC official, and Humberto Calderon Berti, former energy minister and president of PdVSA, disagree completely with PdVSA and said that orimulsion is an original type of fuel and may not be an extremely profitable operation, but it is a way of producing dollars at little cost with a resource (bitumen) that has no other use.
Victor Poleo, an oil economy professor at Venezuela's Central University and former Venezuela’s vice minister of energy, is on record saying "the decision to stop producing orimulsion was actually hatched in Washington and implemented by Caracas," because the United States, like Germany and Britain, wanted to get rid of a competitor for their coal.

Orimulsion, a product developed by Venezuela’s oil think tank INTEVEP, is an emulsion of 70 % extra heavy crude oil of less than 10 degrees API (American Petroleum Institute), water, and surfactants, that is similar to coal.

Source: Petroleumworld
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