In Energy
Arthur Deakin, Director of Energy at AMI

Arthur Deakin1
Director of Energy

Jose Chalhoub, consultant at Venergy Global and Azur Global

Jose Chalhoub2
Venergy Global
Azur Global

It comes as no surprise that Venezuela’s oil sector has undergone a steep production decline under Nicolas Maduro’s regime. Now, with the recent removal of US sanctions, foreign energy operators and investors are cautiously waiting to see if the Maduro administration will comply with US requirements to sustain the long-term lifting of sanctions. In the following sections, we provide a detailed examination of the technical nuances within the oil and gas sector, offering foreign companies valuable insights into the current dynamics and opportunities in Venezuela.

Western division: Potential for light oil production in the Tomporo Field and the Lake of Marcaibo

The gradual decline in production across PDVSA fields in the Western and Eastern divisions is attributed to reservoir depletion, insufficient investments, and vandalism. Therefore, foreign investments should prioritize the revitalization of fields with light oil production and reserves, such as those situated in the Zulia state within the Western Division, particularly the Tomoporo field. Over the past decade, the Tomoporo field in the Andean state of Trujillo, adjacent to Zulia, has emerged as a highly promising source of light oil, currently yielding approximately 100,000 barrels per day, with the potential to escalate production to 150,000 barrels per day. Despite possessing over 14 billion barrels of crude oil reserves with an API gravity ranging from 12 to 30, the Tomoporo field has struggled to restore its production levels in recent years. In the context of the ongoing energy transition, light oil prospects hold significant appeal and could bring about transformative changes for a country predominantly engaged in heavy crude oil activities.

Investments should also target the revival of offshore production in the Lake of Maracaibo, which has experienced a significant decline, particularly in the areas of Tia Juana, Lagunillas, and Bachaquero. This decline contrasts with the production levels seen in 2004 and subsequent years when the Western Division averaged a production of 1 million barrels per day. It is important to note that PDVSA aims to deplete existing oil inventories due to substantial issues with facilities such as storage tanks and pipelines. Additionally, there is a goal to reopen approximately 1200 closed wells to recover production in various onshore fields like Tia Juana, Bachaquero, and Lagunillas, historically comprising the primary hub of oil production in the Zulia state, Venezuela.

Simultaneously, PDVSA aims to integrate a Very Large Crude Carrier (VLCC) floating storage tank in Amuay Bay. This tank will serve as a facility to store the heavy oil produced in the western side of the region, particularly in Maracaibo, encompassing the fields of Mara, Paz, and La Concepcion. This initiative addresses the significant limitations of onshore facilities, such as storage tanks in the area. PDVSA also has plans to restore gas compression plants and flow stations.

The Eastern Division: Light oil production could increase to 300k bpd

In contrast, the Eastern Division, encompassing the states of Monagas, Anzoategui, and Bolivar, has played a pivotal role in offsetting the substantial decline witnessed in the Western Division. Despite its recent success in boosting production, this region, a significant contributor to light oil production, has experienced a recent downturn. Strategic investments are needed to revive wells in key fields like Jusepin, Pirital, and El Furrial, with El Furrial historically standing out as one of the largest light oil-producing fields. PDVSA aims to rejuvenate production in this specific area through gas lifting in mature camps, addressing challenges posed by depletion and exhaustion in multiple wells. This targeted investment is expected to encompass over 400 wells, with the goal of raising light oil production to 300,000 barrels per day.

On the flip side, the Orinoco Heavy Oil Belt is a major contributor to PDVSA’s heavy oil production and is pumping approximately 400,000 barrels per day. This underscores the importance of restoring the operations of upgraders such as PetroCedeno and PetroMonagas, crucial facilities among the four upgraders in the Orinoco Belt. Another key investment area for PDVSA involves obtaining diluents, vital for mixing with the heavy oil extracted in the region. Usually, PDVSA acquires these diluents from the U.S. However, in light of sanctions, alternative sources are being considered, including the importation of condensates from Iran and the procurement of diluents from Algeria. This investment is crucial for increasing oil production in the Orinoco Oil Belt, aiming to go beyond current levels.

Refining: Focus on Paraguana and Puerto La Cruz Refineries

In terms of refining, substantial investments should focus on the refurbishment of the largest refinery, Amuay, within the Paraguana Refining Complex. This refinery, which historically processed over 800,000 barrels per day, has experienced a significant drop in gasoline production and has affected supplies to the western side of the country. Simultaneously, investments are crucial for the Puerto La Cruz Refinery, with its original 190,000 barrels per day capacity now reduced to under 100,000 barrels per day. Together with El Palito, these refineries are collectively responsible for 80% of local gasoline supplies and are a major reason behind the persistent gasoline shortages in Venezuela. Investment is also needed for the facilities at the Jose Antonio Anzoategui port, which plays a central role in the export and import of oil and products from Venezuela. Comprehensive refurbishments of various port facilities are necessary for optimizing its operations.

What’s next: PDVSA Objectives

Overall, PDVSA aims to increase the production of lighter oil types to boost gasoline output, addressing intermittent fuel supply issues. They will likely prioritize the Tomporo field in the Western Division as well as the recovery of production in the Monagas fields like Jusepin and El Furrial. To cater to U.S. markets and Gulf Coast refiners, there’s a need to enhance heavy oil production, both in the Orinoco Belt and fields like Boscan in the Chevron joint venture. PDVSA aims to raise production by an additional 300,000 barrels in the coming months.

Channeling investments into drilling rigs is also essential to rejuvenate oil production and to address the recent shortage experienced in Venezuela. Investing in the security and safety of operations, particularly in areas like the Western Division bordering Colombia, will also mitigate historical challenges with criminality and vandalism affecting pipelines and storage tanks.

It’s worth noting that foreign players, including China and Russia, have engaged in various oil joint ventures with PDVSA, particularly in the Orinoco Oil Belt. Companies such as the China National Oil Company, PetroChina, Gazprom, and Rosneft, alongside Chevron’s 50-year presence in Venezuela, have been active. The Petroboscan joint venture, once a major producer with foreign oil companies, has faced significant drops in output over the last decade due to operational and financial challenges, compounded by sanctions against PDVSA.

AMI, in partnership with Geopolitical Risks Consultant, provides market research, political risk and security analysis to help foreign companies operate successfully in Venezuela’s energy sector.

Arthur Deakin, Director of Energy at AMI

Arthur Deakin
Arthur Deakin is Director of AMI’s Energy Practice, where he oversees projects in solar, wind, biomass and hydrogen power, as well as energy storage, oil & gas and electric vehicles. Arthur has led close to 50 Latin American energy market studies since 2017 and has project experience in over 20 jurisdictions in the Americas. He has also written and published over 20 articles related to the energy sector.

Jose Chalhoub, consultant at Venergy Global and Azur Global

Jose Chalhoub
Jose Chalhoub is consultant at Venergy Global and Azur Global. He is a political risk analyst with 13 years of previous experience in Venezuela’s state oil company (PDVSA) and 20 years of oil industry expertise. He has partnered with Arthur, the Director of AMI’s Energy Practice, to produce this piece.

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