VENEZUELA - The Venezuelan Oil Refining Sector.

The state-owned Petroleos de Venezuela (PDVSA) controls one of the biggest oil refining systems in the world. A major expansion of this was achieved in 1996, when the $2.7 bn Cardon Refinery Upgrading Project (PARC) and new units in other refineries began operations.

In a project to cost $800m, the refinery at Puerto La Cruz is to have a naphtha hydrotreating unit added to raise unleaded gasoline production to 45,000 b/d, and a diesel hydro-desulphurisation unit to raise the output of low-sulphur diesel to 30,000 b/d. The diesel will be exported to fellow South American and Caribbean countries, when the unit is completed in 2004. Work on both units was delayed because of nationwide oil strikes last December and January.

The strikes caused oil production and refining in Venezuela to stop in late 2002. Supply to the domestic fuels and lubricants market rose from 109,000 b/d in January to 363,000 b/d in June and to about 480,000 b/d in recent weeks.

PDVSA continues to place emphasis on increasing its competitiveness by raising heavy crude processing capability through strategic associations based on Orinoco oil (see Gas Market Trends of this week), reducing residual fuel output and improving the quality and amount of oil product exports (see next week's Review).

In order to export higher quality oil products and be able to satisfy a growing domestic population with gasoline and other light products, PDVSA has invested billions of dollars in major upgrading of its four large Venezuelan refineries. Amuay refinery's upgrading and deep conversion, alone, cost $1.5 bn.

According to PDVSA's top management, operations at the refining sector now have been restored to pre-strike levels of more than 1.1m b/d. But independent experts say the throughput level is are still less than 1m b/d

There is, meanwhile, a growing upstream/downstream partnership between PDVDSA and Petrobras of Brazil. Brazilian market experts feel this makes increasingly viable the construction of a planned new oil refinery in Venezuela, which will require an estimated $2 bn investment.

PDVSA oversees a large petrochemicals business, manufacturing a range of products in Venezuela and overseas through joint ventures. These activities are handled by PDVSA's integrated subsidiary Petroquemica de Venezuela (Pequiven). There are three major petrochemical centres in Venezuela - Zulia-El Tablazo, Moron and Jos (Anzoategui) - owned and operated by Pequiven. A big expansion of this sector is envisaged under PDVSA's current programme (see DT No. 20).

PDVSA has an oil refining capacity of 3.4m b/d. Of this, about 1.3m b/d is domestic (see following pages). The rest is spread in the US, Europe and the Caribbean (see Part 4 of the survey of Venezuela in OMT No. 21).