State units make Orinoco progress

A number of mainly state-owned companies are making steady progress with the certification of reserves on a raft of new blocks in Venezuela’s Orinoco heavy oil belt as US and European multinationals struggle to preserve the value of their investments in the same region.

One of these companies, Iran’s Petropars, has reached the halfway point in a 16-well stratographic drilling programme in partnership with Venezuela’s state-run PDVSA on the Ayacucho-7 Block, covering 500 square kilometres in Anzoategui state.

“PDVSA has just got a second rig working. We hope to finish all the stratographic wells by July and start phase three of the project by the end of that month,” said Petropars country representative Mohammed Ali Talebi.

The companies are sharing costs but PDVSA is shouldering the burden of drilling operations on shallow wells of about 2000 feet.

The third phase of certification will involve core and fluid analysis with updating of the static and dynamic models and assessments of permeability.

PDVSA officials have said they hope to conclude the quantification process on this block before the end of this year, using the services of a third-party certifier.

Successful completion of the certification process would allow PDVSA and Petropars to press ahead with negotiations early in 2008, Talebi said, with a view to forging a Venezuelan-controlled mixed company with a development plan, including seismic acquisition and interpretation ahead of any drilling, and a business model.

Under the most optimistic scenario, development of Ayacucho’s crude reserves could start in the second half of 2008.

The Venezuelan state company had said that initial surveys have indicated that there are at least 31.2 billion barrels of oil in place on this block, and that 6 billion barrels may eventually be squeezed from the Orinoco sands.

Talebi would not confirm such estimates but said stratographic drilling was confirming initial forecasts so far.

He added that the two companies were now planning to install an early production system on Ayacucho-7 to kickstart revenue and aid the evaluation process.

Output on the early production system would probably be between 40,000 and 50,000 barrels per day, Talebi added.

PDVSA has said it intends to build a large new upgrading complex in the region between the Ayacucho and Carabobo blocks.

Refining options for Ayacucho-7 crude include Indonesia, where Iran and Venezuela have held talks over a planned 300,000 bpd refinery, including the possibility of PDVSA taking a 30% stake.

The Iranians are working on similar opportunities in China, Malaysia and Syria.

“Venezuela has shown interest in participating in these projects, although discussions are in their early stages,” said Talebi.

Francisco Bello, Latin America director with IHS Energy, said: “When Venezuela decided to allow these companies into the Orinoco belt it was not just a free

ride, it is about giving PDVSA access to new markets in the east and elsewhere.”

In the case of Ayacucho-7, Iran has signalled that it may be willing to farm out equity to international partners to help spread risk and costs for a project that would be expected to absorb investments of $4 billion.

Other companies working on certification projects in the same region include China National Petroleum Corporation, India’s Oil & Natural Gas Corporation, Russia’s Lukoil, Petrobras of Brazil and Spain’s Repsol YPF.