Upstream Online: Venezuela bets on Orinoco

Venezuela hopes to jump past Saudi Arabia as the world leader in certified crude oil reserves when it finishes registering oil deposits in its vast Orinoco Belt this year.

An increase of 22.5% in the Latin American country’s reserves was behind Opec’s announcement last week that the group’s proven reserves rose in 2009 to 1.06 trillion barrels.

“We hope to end 2010 with the incorporation of (another) 105 billion barrels of proven reserves. With this achievement, Venezuela would become the country with the biggest certified crude reserves (316 billion barrels) on the planet,” President Hugo Chavez’s government said in a statement at the weekend.

Saudi Arabia has 265 billion barrels of reserves, according to its latest statement to Opec. But its big advantage is that its oil is mostly light, conventional, easily-pumped crude, Reuters reported.

In January, the US Geological Survey gave credibility to the Caracas government’s long-held assertions by saying the Orinoco belt held some 513 billion barrels of crude that could be recovered — if costs were not an issue.

There are doubts about when touted projects to tap the area will come online because of mismanagement in state oil company PDVSA, which has a majority stake in each Orinoco block, and political uncertainty about investing in Venezuela, where Chavez has nationalised most of the oil industry.

That included taking over multibillion dollar Orinoco projects run by US players ExxonMobil and ConocoPhillips in 2007, followed by expropriating the assets of 76 smaller oil service companies in May last year.

But those concerns did not stop Venezuela signing several contracts in February with energy companies for projects slated to add 2.1 million barrels per day of new production and draw some $80 billion in investment.

Most interesting are Junin Block 5, where Italy’s Eni has a 40% stake, Carabobo project 3, where Chevron has a 34% interest, and the Carabobo project 1, where Spain’s Repsol has an 11% interest.

“The question is; to what extent will PDVSA let their partners participate? Because they do have skilled partners in these blocks with the experience that’s needed,” said one consultant who works in the sector and asked not to be named.

Elsewhere in the Orinoco, Chavez’s socialist government has awarded deals to Chinese, Indian, Vietnamese, Japanese and Malaysian companies, and to a consortium of five Russian companies. These players have less experience handling extra heavy crude.

Published: 13 July 2010 15:41 GMT UpstreamOnline.com