VENEZUELA - Awaiting Offshore Gas.

Caracas has invited 37 international oil companies (IOCs) to bid for offshore gas E&P blocks which it hopes will become a major source for the domestic gas market and the rest of Latin America. The waters of the Gulf of Venezuela and the nearby area of La Vela, off the east coast of the Paraguana peninsula, could hold up to 26 TCF (740 BCM) of natural gas, according to the government.

Officials hope that private companies will discover 4-6 TCF, which would be enough to cover the natural gas deficit in western Venezuela and supply growth projects at several petrochemical and power generation plants (see Gas Market Trends No. 18).

The Venezuelan government has also used the bidding round in its fight with ExxonMobil, by forcing all firms interested in the offshore blocks to sign an agreement waiving their right to take legal action against the state over disputes in the oil sector, in view of the government's unilateral increase in royalties on its Cerro Negro extra-heavy crude oil upgrading SA.

Marketed gas production is far short of domestic demand. In April 2004, Caracas announced plans to raise natural gas production capacity in eastern Venezuela from 4.35 BCF/day to 9.37 BCF/day (96.5 BCM/year) by 2010.

The Orinoco SAs: The four Orinoco SAs, together producing 600,000 b/d, are to be expanded despite the big increase in royalties and tax. The four SAs are Petrozuata, Cerro Negro, Sincor and Hamaca. The following are their brief profiles:

Petrozuata: The first SA to develop 9[degrees] API Orinoco oil was signed in early November 1995 by Maraven and Conoco in a $3 bn venture to develop extra-heavy crude oil and produce 105,000 b/d of 22[degrees] API synthetic oil at a plant on the coast (see the background in Vol. 61, OMT/GMT No. 19). This JV, Petrozuata, has even exceeded this capacity, producing the extra-heavy oil from more than 500 horizontal wells drilled to recover 1.5-2 bn barrels over 35 years.

Petrozuata's upgrader at Jose came on stream in early 2001, converting extra-heavy crude to a lighter grade for export. Owned 50.1% by Conoco (now ConocoPhillips) and 49.9% by CVP, Petrozuata has debottlenecked its facilities to produce 120,000 b/d of lighter oil. The extra-heavy crude, mixed with 47[degrees] API naphtha blend diluent, is pumped through a 36-inch, 200 km pipeline to the Jose upgrader.

At the Jose upgrader, the diluent is separated and returned to the field through a second, 20-inch pipeline for re-use.

The 9[degrees] API crude is blended with naphtha and lighter Venezuelan crude oils. The pipelines, the first private lines to be built in Venezuela in more than 20 years, have a 200,000 b/d capacity which can be raised eventually to 500,000 b/d. The pipeline system is being used by Cerro Negro and other strategic associations (SAs).

Some of the 22[degrees] API crude is being used by the local refining system to produce gasoline and gasoil for the domestic market (see DT). The rest of the output is shipped in double-hulled tankers to ConocoPhillip's refinery in Lake Charles, Louisiana, for processing into high-value products. The acidic crude unit at Lake Charles was commissioned in late 2000 and now processes Petrozuata crude.