From: glevy@PRATT.EDU
Date: Thu Jun 01 2006 - 08:18:12 EDT
Oil-Rich Venezuela Looks to Tar Deposits
Beneath the plains and winding tributaries of the Orinoco River lie
what Venezuela believes is the planet's largest oil
deposit—a tar-soaked basin that could help meet spiraling
global energy needs.
By: Natalie Obiko Pearson - AP
Published: 31/05/06
JOSE, Venezuela — Beneath the plains and winding
tributaries of the Orinoco River lie what Venezuela
believes is the planet's largest oil deposit—a tar-soaked
basin that could help meet spiraling global energy needs.
It's known as the "Faja," or "belt": a strip three times
the area of Kuwait potentially holding 1.2 trillion barrels
of extra-heavy oil.
Jet-black, sticky and oozing like molasses, Orinoco oil was
long written off as too difficult and costly to produce. Now
rising oil prices make it increasingly attractive.
President Hugo Chavez, who hosts a meeting of the
Organization of Petroleum Exporting Countries on Thursday,
says these unconventional reserves mean Venezuela will
become the world's leading oil source for decades to come.
"Venezuela has the largest oil reserves in the world,"
Chavez declared recently, referring to the more than 300
billion barrels of oil he believes is recoverable, mostly
from the Orinoco belt.
Saudi Arabia, which pumps more oil than any other nation,
claims 260 billion barrels of so-called proven reserves, or
roughly 25 percent of the world's conventional oil,
according to the U.S. Department of Energy.
Chavez, who accuses multinationals of looting Venezuela's
oil wealth, has squeezed a greater share of profits from
the industry. A new tax on Orinoco operations takes effect
this week and the government plans to take majority control
of the projects eventually.
But private companies _ largely locked out of the Middle
East and many other conventional oil reserves _ have not
been scared away.
As light, easy-to-produce sources dry up, the global energy
industry is turning to unconventional oils, said Ali
Moshiri, head of Chevron Corp.'s Latin American
operations.
"There's a sense of urgency," he said.
The Massachusetts-based Cambridge Energy Research
Associates estimates that unconventional oils will account
for nearly a third of world supplies by 2010, up from 22
percent in 2005.
Venezuela's Orinoco and Canada's tar sands account for the
bulk of heavy oil production at present. Other
unconventional sources of oil that are expected to grow
include U.S. shale rock, natural gas liquids and potential
deposits in very deep waters off Angola and in the Gulf of
Mexico.
The asphalt-tinged smell of Orinoco oil hangs in the air at
the Jose refinery's Sincor upgrader plant on Venezuela's
Caribbean coast.
There, state oil company Petroleos de Venezuela SA, or
PDVSA, Norway's Statoil ASA and France's Total SA take
heavy crude _ which has been diluted with a solvent to an
opaque, runny fluid so it can be piped in from an Orinoco
well 125 miles (201 kilometers) away _ cook it at more than
900 degrees, inject it with steam and process it with
hydrogen to strip it of impurities.
It emerges as a clear, amber crude that's among the world's
most marketable, Sincor officials say. Shipped to the United
States and Europe, it's refined into gasoline, diesel and
jet fuel.
The Jose refinery houses three projects in which PDVSA
works with BP PLC, Exxon Mobil Corp., ConocoPhillips and
Chevron to upgrade crude. All told, they produce 600,000
barrels a day of synthetic crude, about a fifth of
Venezuela's official production.
"Of all the unconventional sources of oil, the one that
gets the least attention ... but in my opinion is the most
economic is the Orinoco," said Robert Skinner of the Oxford
Institute for Energy Studies.
"They've demonstrated that they can produce this stuff at
very low cost," he said, expaining that producing a barrel
of Venezuelan synthetic crude can cost US$16 (12.50 euros)
a barrel, compared to a barrel from Canadian tar sands that
can go as high as US$30 (23 euros). Orinoco crude can be
produced economically as long as the oil price stays above
US$22 (17 euros) a barrel, he said.
Shell Venezuela President Sean Rooney says his company is
interested in bringing technology it uses with tar sands in
Canada to the Orinoco. Venezuela has agreed to study the
possibility.
ConocoPhillips Chief Executive James Mulva said last month
that his company also hopes to have a chance to "expand our
investments" in extra-heavy crude.
Venezuela, meanwhile, is wooing other companies interested
in quantifying and certifying untouched areas of the
Orinoco.
Chavez has turned to companies from politically friendly
countries: Iran's Petropars, India's ONGC, Brazil's
Petrobras, China's CNPC, Russia's Gazprom and Lukoil and
Spanish-Argentine Repsol YPF.
But Venezuela faces significant hurdles. Much depends on
improving the percentage of Orinoco oil that can be
extracted.
The recovery rate in the Orinoco is currently as low as 7
percent, though Venezuela is aiming to extract at least 22
percent. Current worldwide average recovery rates are about
35 percent.
Venezuela already boasts the largest proven reserves
outside of the Mideast _ that is, some 80 billion barrels
that can be recovered at current prices and current
technologies. It hopes to quadruple to 315 billion by
counting its Orinoco reserves by the end of 2008.
Chevron's Moshiri says meeting those goals will require 30
new upgrader plants and more than US$200 billion (150
billion euros) of investment.
<http://www.venezuelanalysis.com>
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