VENEZUELA - Orimulsion.

The external marketing of Orimulsion, a burner fuel or "liquid coal" developed from Orinoco bitumen, is very difficult and supplies require long-term contracts with power plants as in the case of LNG. PDVSA M&M (Bitor) is to raise Orimulsion exports from 5m t/y to 10m t/y in 2000, thanks to a new deal with China.

To penetrate the power sector in various parts of the world, Orimulsion has to compete with coal and heavy fuel oil, as well as natural gas and other sources of energy. In addition, Bitor either has to offer a discount or has to take part in financing a power company using Orimulsion on long-term basis. Alternatively, it would have to offer a term client a stake in a new Orimulsion plant to be built in eastern Venezuela.

So far Bitor, since early 1998 part of PDVSA Manufacturing & Marketing (PDVSA M&M), has managed to secure ten term contracts, for a total of more than 9.7m t/y, with the following customers:

China National United Oil Corp., China, for 5.2m t/y from early 2000 to burn at several power and industrial plants under a 20-year contract signed in 1990. CNUOC first tested 200,000 tons in 1996. In 1997 it signed a one-year contract for 1m tons to test the fuel further and again took 1m tons for each of 1998 and 1999. The 5.2m t/y will be produced by a new Orimulsion plant being built at the Morichal complex as a JV with CNUOC, to be on stream next year, owned 70% by the Chinese and 30% by PDVSA M&M.

Guatemala Generating Group, Guatemala, for 300,000 t/y for a power plant due to start up in 2000, under a 20-year contract.

New Brunswick Electric Power Co., Canada, for 800,000 t/y to burn at the 300 MW Dalhousie plant under a 20-year contract.

SK Power, Denmark, for 1.6m t/y for the 650 MW Asnaes plant, under a provisional three-year contract signed in 1996. A longer term contract is being negotiated. With Denmark applying one of the strictest environmental laws in Europe, SK Power had been testing the Orimulsion since 1994.

Satat Power System, Lithuania, for up to 500,000 t/y for the 100 MW plant of Elektranei under a 20-year contract signed in 1996.

Japan: Kashima Kita Electric Power Corp. for 355,000 t/y for the Kashima plant under a five-year contract; Mitsubishi Chemical for 300,000 t/y for the Mizushima power plant under a five-year contract. Kansai Electric for 200,000 t/y for the 150 MW Osaka plant. Hokkaido Electric for 120,000 t/y for a new 350 MW plant at Shiriuchi.

Arawak Cement Co., Barbados, for 40,000 t/y with deliveries begun in 1997.

In addition, Italy's privatising power utility Enel has been taking up to 600,000 t/y for testing at its Brindisi power plant. Once Enel becomes convinced the Orimulsion is a suitable fuel, it would sign a long-term contract for a larger volume. Taiwan has been testing variable volumes of Orimulsion since 1998. Bitor and a consortium have agreed that, if all goes well, a 25-year agreement would be signed for 3.4m t/y of Orimulsion to be supplied from 2000 or 2001 to Intergen, APED, Taiwan Synthetic Rubber and China Steel.

Under PDVSA's ten-year expansion programme, exports of Orimulsion should exceed 35m t/y by 2010. Bitor should work hard for this and would expect help from the various subsidiaries of PDVSA M&M and PDVSA Services.

Orimulsion was discovered by accident in the early 1980s, when experts from a Lagoven unit mixed bitumen with water to transport it. The experts found that the mix could burn. PDVSA then seized the opportunity and its R&P unit later developed a surfactant additive with the help of BP).