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Yes Venezuela needs important investments to recover its oil sector. But where do they have to most urgently be directed to?
After the recent surprising decision by the Biden administration to ease all sanctions on Venezuela's oil, gas and mining sector in exchange for holding free and fair presidential elections next 2024, certainly there has been an important surge of interest from different overseas potential investors from the U.S and also Europe over Venezuela on what are the implications of this decision, what's the current political landscape and if this is certainly to last which will depend importantly on the political dynamics and negotiations currently underway between Caracas and Washington considering the current state of global oil markets and rising global geopolitical risks focused on the Middle East and the still ongoing war between Ukraine and Russia. But the key questions are directed to where specific areas to invest in order to speedily start recovering Venezuela's still decayed oil production. Here are some of the most crucial and critical areas to start with:
Based on the progressive decline of production of different fields of PDVSA both in the Western and Eastern division due to different reasons such as depletion, lack of enough investments in the last years, vandalism across wells, etc, much of the effort to direct investments should go to recover those fields of light oil production and reserves such as for example in the Western Division in the Zulia state the Tomoporo field which has been in the last decade the most important promise of prediction of light oil located in the Andean state of Trujillo close to Zulia which in the last years has been producing close to 100 kbd, with a potential capacity to produce up to 150.000 barrels per day and with reserves of over the 14 billions of barrels of crude oil of between 12 to 30 API type of oil, but due to different reasons its production has not been able to recover and dropped significantly. In a hub where the majority of production since the start of commercial oil activity has been mostly of heavy oil type, like for example that of PETROBOSCAN the joint venture where CHEVRON participates with PDVSA.
Also efforts should go to lift up production offshore in the Lake of Maracaibo which has been suffering an important drop of production especially in the areas of Tia Juana, Lagunillas and Bachaquero considering the levels of production that area used to have in 2004 and onwards based on the fact that the Western Division was averaging a production of 1 MMBD iin 2004 which started to collapse from that year onwards while its important to mention that PDVSA has a goal of draining existing inventories of oil due to important problems with facilities such as storage tanks, pipelines and also has a goal to reopen around 1200 closed wells in order to try to recover production across the different onshore fields such as Tia Juana, Bachaquero and Lagunillas, a hub which used to comprise the bulk of oil production in the Zulia state historically in Venezuela.
At the same time, PDVSA has another goal of incorporating a VLCC floating storage tank in the Amuay Bay to be used as a facility to store all the heavy oil produced in the western side of the area especially in Maracaibo in the fields of Mara, Paz and La Concepcion due to important levels of exhaustion of facilities onshore such as storage tanks in the area, while also plans to recover gas compression plants and flow stations.
Meanwhile, in the Eastern Division comprising the states of Monagas, Anzoategui and Bolivar, which in the last recent years has been offsetting the steep decline of production of the Western Division with a rising production and which consists of an important part of light oil production, recently has seen a drop and where the bulk of investments should go to recover wells in the fields of Jusepin, Pirital and El Furrial, one of the largest and which used to have the largest bulk of production of light oil, where PDVSA aims to recover production concentrated in that specific area through gas lifting in mature camps due to depletion and exhaustion of different wells which comprise an important part of the light oil produced in the region especially concentrated in Monagas and where more than 400 wells will likely be intervened in order to lift up light oil production to 300.000 barrels per day.
Meanwhile with regards to the Orinoco heavy Oil Belt now concentrating the majority of production of PDVSA mostly of heavy oil around 400.000 barrels per day, the key investment to carry out will be in trying to recover operations of the upgraders such as PetroCedeno and PetroMonagas of the 4 upgraders of heavy oil produced in the Orinoco Belt in order to maximize the production of lighter types of oil and also the other key investment to carry out is in the diluents production and purchases by PDVSA needed to be mixed with the heavy oil produced in the area which PDVSA used to import from the U.S. but due to sanctions this has become an important hurdle and pushed PDVSA to import condensates from Iran and purchasing diluents from countries such as Algeria to name one example, but definitely this is key in order to revamp oil production in the Orinoco Oil Belt to higher levels than what they are currently.
Regarding refining, investments should be directed heavily in the revamping of the largest refinery Amuay of the Paraguana Refining Complex, which used to process over 800.000 barrels per day and which has suffered important drop of production of gasolines which is responsible for gasoline supplies to the western side of the country while at the same time important to carry out investments in the Refinery Puerto La Cruz which has a capacity to process 190.000 barrels per day of gasoline now under 100.000 barrels per day, which altogether are responsible along with El Palito refinery of the 80% of gasoline supplies to local consumption and has been the main reason of the still ongoing gasoline shortages problems in Venezuela.
Meanwhile, another key investment to carry out is in the Jose Antonio Anzoategui port facilities of exports and imports, responsible for the majority of oil and products exports from Venezuela and needs to revamp different facilities of the port.
Assessment: In an overall sense, the goal for PDVSA is to try to ramp up its lighter types of oil production in order to maximize the production of gasolines to improve the gasoline intermittent problems in the country amplifying the base of light oil that’s why the focus should be in the Tomporo field in the Western Division while concentrating efforts in the recovery of production in the fields of Monagas such as Jusepin, El Furrial, while in order to attend US markets and refiners in the Gulf Coast it needs to ramp up production of heavy oil concentrated both in the Orinoco Belt and also in fields such as Boscan in the Joint Venture with CHEVRON, and where its important to mention PDVSA has a goal to hike production to 300.000 barrels more in coming months.
Also important to underscore the importance to direct investments in drilling rigs of which PDVSA and Venezuela have been lacking of in the last recent years and having put one rig in 2021 into action and of which reactivating drilling activities is key and crucial in order to ramp up oil production in Venezuela. At the same time, investing in security and safety of operations is another key element especially in operational areas such as located in the Western Division bordering with Colombia which traditionally suffered of important levels of criminality and vandalism impacting in the operations of pipelines, storage tanks and others.
And as another important issue to add is that foreign players such as China and Russia have been involved in different oil joint ventures with PDVSA in the last recent years especially focused in the Orinoco Oil Belt with companies such as the China National Oil Company and PETROCHINA, GAZPROM and ROSNEFT and also in operations in the Western Division of PDVSA while CHEVRON presence in Venezuela has been active for the last 50 years specifically concentrated in the PETROBOSCAN Joint Venture and in the Orinoco Oil Belt where the PETROBOSCAN venture being one of the largest producing ventures of PDVSA with any foreign oil company averaging 150.000 barrels per day in the last decade approximately having dropped considerably due to the diversity of operational and financial problems and sanctions against PDVSA as well.
