Venezuela takeover may harm Orinoco oil projects

Venezuela’s upcoming takeover of four large heavy oil projects will likely reduce the long-term efficiency of the OPEC nation’s most important crude operations, analysts told Reuters on Monday.

The move could reduce investment in crucial oilfields and lead to declining production in Venezuela, a key oil supplier to the United States, as energy prices remain stubbornly high and the U.S. remains dependent on Middle Eastern oil.
“In the long term, the situation is going to be difficult in terms of ensuring investment and maintaining production,” said Roger Tissot, an analyst with PFC Energy in Washington.

“During the takeover, foreign companies are going to simply wait and see — and in the meantime they won’t be investing much.”

The four projects are more complex than standard oil operations, since they pump hard-to-produce tarry Orinoco oil, then use special refining techniques to “upgrade” the oil into lighter synthetic crude fit for standard refineries.

“You are dealing with unusual field characteristics, unusual well formation, and extremely heavy oil,” said Fadel Gheit, an analyst with Oppenheimer & Co. in New York.

“People who don’t have experience with heavy oil production are really not familiar with it.”

PDVSA has already been struggling to maintain operations since dismissing over half its workforce in 2003 for joining a massive walkout meant to oust Chavez.

Venezuela’s refineries have suffered repeated outages, and international estimates show oil production at only 2.4 million bpd in contrast to official figures of above 3 million bpd.

Scotsman