As Venezuela's oil production continues to decline, the Chavez administration has focused on courting international investment to increase production in the Orinoco Belt. Located in the southern portion of the eastern Orinoco River Basin, Venezuela’s non-conventional oil deposits of approximately 1,200 billion barrels are found primarily in the Orinoco oil sands, an expensive and difficult environment for oil extraction.
According to the Chavez administration and some independent assessments, unproven reserves may surpass the amount of worldwide reserves of conventional oil. With the price of oil predicted to remain high, investment in the Orinoco oil sands has become more attractive to international interests.
Over the last few months, the Venezuelan government and state-owned oil company, Petroleos de Venezuela, S.A. (PDVSA), has accelerated the process of facilitating private-sector investment to develop the Orinoco Belt.
Beginning in February 2010, Venezuela distributed by tender one oil block to a consortium led by Chevron and one oil block to Spanish company Repsol. Malaysia’s Petronas and India’s ONGC also demonstrated significant interest.
On 1 April, Russian Prime Minister Vladimir Putin visited Caracas for the first time and signed an memorandum for the creation of a joint Venezuelan-Russian business venture to be called PetroMiranda, which will assist with oil exploration and drilling in the Orinoco Belt, specifically in the Ayacucho 2, Ayacucho 3 and Junin 3 blocks. The Russian government has also signed an agreement to pay an entrance fee of US$1 billion for exploration of the Junin 6 field, of which US$600 million has already been deposited.
Not two weeks later, on 13 April, the Venezuelan Minister of Energy and Petroleum announced that investments in the Orinoco Belt will total US$120 billion over the next seven years, adding that the Orinoco Belt alone is expected to produce close to 3 million barrels a day by 2017.
Venezuela and China agreed on 19 April to form a joint venture to explore the extra-heavy crude in the Junin 4 block of the Orinoco Belt - a project that could require as much as US$16.3 million to get started. According to sources, PDVSA will own 60% of the joint venture, and China’s CNPC will own 40%. The company is expected to initially produce 50,000 barrels of oil per day by 2012 and 400,000 barrels per day by 2016, and will process the heavy crude for export. In addition, CNPC will pay US$9 million to Venezuela as a bonus for Orinoco Belt exploration rights.
Brazilian construction company Odelbrecht was awarded a tender to increase oil production at oil fields in Zulia in early May. And Chevron announced - just before signing an Orinoco Belt exploration agreement - that it will begin exporting gas from Colombia to Venezuela, presumably because Venezuela's natural gas output is not high enough to meet national demand.
By Southern Pulse