The projected increase in the production of synthetic crude oil in the Orinoco Belt, will have to wait for the expansion of Petróleos de Venezuela’s refining capacity at home and abroad. The auction of twelve blocks of extra heavy oil is to be announced in two months.

Thanks to the expansion of the strategic associations operating in the Orinoco Belt, and to the approval of new businesses, it is expected to yield 1.2 million barrels per day in 10 years.

However, according to Energy and Mining Vice-Minister, Luis Vierma, this step will not be taken until the refining capacity of Petróleos de Venezuela (Petroleum of Venezuela) has expanded its refining capacity, through the increase in the potential of its installations, the construction of new plants in the country, and the upgrading of its refineries in the USA, that are part of Citgo Petroleum Corporation network.

“But we are somewhat behind in the definition of what we are going to do in the Orinoco Belt, because we must keep in mind that the type of oil deal in which exploration, extraction and refining were done separately is no longer made. If oil production is to be expanded in order to place an extra barrel in the market, then the placement of that extra barrel in the market must be guaranteed.”, said Vierma.

Vierma indicated that any increase in the offer of crude hydrocarbons from the Belt, must be made under the guarantee that it will be processed.

“That explains why we have delayed this matter, because the capacity of our refineries, as well as that of our refineries abroad, has reached its peak. The idea is to determine how we can expand our refining capacity not only in the USA, but also in Venezuela”, he added.

All this means -said the Vice-Minister- that OPEC production quotas should not be raised without previously increasing the refining capacity. Otherwise, there will be, as there is now, enough oil in the market, but not enough capacity to refine it. That’s why there is such a strong strain on the gasoline prices.

According to the Ministry of Energy and Mining (MEM), there are expectations of increasing extraction in the Orinoco Belt from 1.2 to 1.3 million barrels per day over the next ten years. But this scenario depends on the conditions mentioned before.

“Currently, we are having a work team assess not only the national circuit of refineries, but also the one abroad. One of the possibilities is to build new refineries, the other one is to increase the refining capacity in the existing plants by about 200,000 barrels, especially in the Paraguaná refinery” said, Vierma.

The interviewee also explained that the MEM ,along with the operators of the strategic associations (Sincrudos de Oriente, Cerro Negro, Ameriven and Petrozuata) is analyzing the possibility, in case that the business expansion takes place, of “adopting the scheme permitted by the Law of Hydrocarbons: 51% for the upstream (oil extraction) stage, and 49% for the downstream (improvement of the extra heavy oil) stage” .

It’s likely that we make some important announcements in the next two or three years, he said. Because the strategy is practically finished and approved by the Minister. We would like to see what happens if we carry out in situ enhancement projects in the oil fields. But I think we will soon be making the announcements, he assured.

Vierma added that in this case, there would be an open bidding process, and that the companies that are going to work in the area will evidently have great expectations in winning a bid, since they have the infrastructure and the experience in this business.

“I think that the enterprises that are in the Belt today, already have the capacity of handling greater amounts of oil and enough experience in the use of appropriate technology. These competitive and comparative factors will, to their benefit, enable them to make a much more reasonable bid than any other enterprise.”.

The twelve blocks to be auctioned in the Orinoco Belt have been divided considering their “geological sense”, that is, with the intention of “not having to unify the oil fields”. The current strategic associations operating in this area are only 5% of its proven reserves.

Nevertheless, Vierma expressed that “one thing we have to solve with the strategy we are using is the efficiency factor, currently oscillating between 8% and 9%, but if we manage to raise it to 20%, the reserves in the Belt could increase from 235 billion barrels to nearly a trillion, which would give Venezuela an enormous power in possession of resources.

Licenses in two weeks

Vierma announced that in two weeks the Ministry of Energy and Mining (MEM) “will be announcing” the details of the opening of the bidding processes for the exploration and development of the existing gas reserves off the shores of Falcón and in the Gulf of Venezuela.

Minister Rafael Ramírez, approved the auction projects of seven blocks for the extraction and development of offshore non-associated (not necessary for oil extraction) natural gas in western Venezuela.

This project is expected to integrate “a series of important investments” that may begin to materialize by the end of 2005 or early 2006. Seven blocks are already defined, four in the Gulf of Venezuela and three north of Falcón state.

Vierma expressed that the system applied in this case would be the same as the one implemented for the licenses granted in the Delta Platform, where transnational companies like Chevron Texaco (in alliance with Conoco-Phillips) and Statoil were granted operation permits.

For the bidding of the three areas, the Venezuelan state received about 56.6 million $ in bonds and participation rights. These companies are under the commitment of developing at least a minimum exploration program for the drilling of around six or eight wells. To accomplish this, the expected investment is around 107 million $.

Additionally, these contracts establish requirements related to national development, sustainable development and market development, and a 35% business participation by Pdvsa, if any of these areas is declared as commercial.