Venezuela on its way to become very major oil player

Feb 18, 1997 01:00 AM

Feb. 7, 1997 Venezuela's PDVSA has already topped rivals Exxon and Texaco as the biggest gasoline retailer in the United States, but this is just the start of a long-term strategy that could put Venezuela on par with Saudi Arabia as a world oil power. Petroleos de Venezuela owns the Citgo brand and the "76" brand, which had been owned by Unocal. In 1996, PDVSA had over 10 % of the gasoline market in the US, which is the largest of any oil company. With the "76" purchase, PDVSA owns a greater portion, but the figures are not yet available. Massive deposits of heavy oil and bitumen on the northern flanks of the Orinoco River form the basis of Venezuela's planned assault on the world energy market, David Escojido, PDVSA's planning co-ordinator, said. "The Orinoco Belt has 1.2 trillion barrels of heavy oil in place. Of these, very little are in the (proven reserves) books right now," Escojido said. "If we don't do anything and somebody discovers something to replace oil, everyone will be crying about all those reserves down there that we didn't do anything about." Currently, some 66 bn barrels of proven oil reserves rank Venezuela fifth in the world. But modern technology and private finance mean that it is getting closer to adding another 244 bn barrels from the Orinoco Tar Belt to its "proven reserve" books. This would put Venezuela above Saudi Arabia as the biggest oil province in the world, if the Saudi figure stayed at its current 261.4 bn barrels. "We know that in western Venezuela on the eastern shore of Lake Maracaibo there are heavy oilfields that were developed in 1950... In that area we have proved that we can recover up to 45 % of the reserves," Escojido said. "If, of the 1.2 trillion, we only apply 22 % that are not proven yet, we could have 300 bn barrels in proven reserves," he said. "The trick is to do it economically. You need a huge investment up front and the returns are going to come in the long term." Most of the Orinoco Belt is not counted as proven reserves because not enough exploration workhas taken place, but Escojido says PDVSA has already organised five joint ventures in the area worth a total of $12 bn to $13 bn in investments over the next three to five years.
The Orinoco has so far attracted the attention of Phillips Petroleum, Exxon, Mobil, Arco and Conoco; Norsk Hydro and Statoil; Total Petroleum and Germany's Veba Oil. In the next 10 years, PDVSA hopes oil production from the Orinoco will reach 665,000 bpd, part of a planned doubling of Venezuela's oil production capacity to 6.2 mm bpd by 2006. Private finance, in addition to improved technology, is proving to be a key driver in Venezuela's ambitions.
"Of the 3 mm bpd increase (in oil production by 2006), 2 mm bpd would be produced with the participation of private capital," Escojido said. Currently, private capital in involved in just 130,000 bpd. PDVSA says the world will be able to absorb Venezuelan production easily. It forecasts 2 % demand growth over the next ten years, translating into 1.5 mm barrel per day more oil every year. "We have the resources, we have the demand, so what are we going to do? We are going to double our capacity in the next 10 years," Escojido said.

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