Mapping Venezuela’s Oil Industry
At Orinoco Research, we are mapping out Venezuela’s oil and gas industry. It will be essential not just for businesses in the sector, but for any investor evaluating the country’s economic recovery. We are looking into the opportunities and challenges in the industry, and what is the strategic value of each area of interest.
We are starting to evaluate the following fields: Boscan, Tomoporo, Furrial, and Bolivar Coastal, as well as the Orinoco Oil Belt and the Paraguana Refining Complex.
Regarding oil, here are some questions we will try to answer at Orinoco Research:
Which types of crudes should be produced, and who wants them?
Where can production be ramped up and exported more easily?
Who is operating the fields in question? Who has control?
Which fields are essential for domestic consumption and industry?
What is the cost and timeline to recover production to 2 million barrels per day?
Strategic Fields and Refineries
Points of interest in the Western Divsion, around or near Lake Maracaibo (1-4) and in the Eastern Divsion, surrounding the Orinoco River basin (5-6).
Venezuelan oil was born in the Western region of the country, especially around Lake Maracaibo and the Andes. Production historically concentrated there but it has been falling from a high of 1.5 million barrels per day (Mb/d) to 500,000 b/d from 2004 to 2014, due to multiple reasons including lack of investment and the geological depletion of wells.
The bulk of efforts are now being directed to increase production in the Eastern basin, comprising the states of Anzoategui and Monagas, as PDVSA tries to hike the base of lighter oil production. It is also focusing on the Orinoco Oil Belt; the geological area with the largest amount of heavy and extra heavy oil reserves in the world.
WESTERN DIVISION
Campo Boscan
In the state of Zulia, the field is operated by Petroboscan, a joint venture between Chevron (39.2% interest) and PDVSA. The current arrangement since 2022 gives the US giant a large degree of control over operations, which was not possible before.
At its peak in 2004, it was producing 150,000 b/d of heavy crude. It has since been severely impacted by the lack of investments and more recently by OFAC sanctions. It continues to be a very prominent field to invest in due to the quality of its heavy crude—API of 9 to 12 degrees—which is very attractive for US Gulf Coast refineries.
Campo Tomoporo
The most prominent foreign oil company in Tomoporo is Spain’s Repsol. The field is located between Zulia and Trujillo. These two states have reserves totalling 14.5 billion barrels of medium to heavy crude, with an average of API of 11 to 30 degrees.
Tomoporo itself is the main hub of commercial production of light oil in the region. It is the most attractive field to invest in despite difficulties with security and its location. The area close to the border with Colombia is especially prone to suffering sabotage attacks by guerrillas operating in Colombia, or from criminal groups operating on both sides of the border, selling parts stolen from local facilities. Targeted infrastructure includes wells, tank farms, and pipelines connecting the two countries. The kidnapping of oil workers used to be a risk though it seems to have ended in the last four years.
Bolivar Coastal Field
The largest oil field in South America, it stretches along the northeast of Lake Maracaibo, with both onshore and offshore wells. It is comprised of 6,000 wells and sits atop 30 billion reserves of oil. Many wells, however, are facing critical issues such as geological depletion after decades of use, aging facilities, and poor security conditions. Some of the major players alongside PDVSA are Chevron, Gazprom, Rosneft, Maurel et Prom.
Paraguana Refining Complex
Bolivar Coastal Field’s medium and heavy crudes are ideal for the refineries in Cardon and Amuay, in the bordering state of Falcon. Both are in the Paraguana Refining Complex, which is one of the largest in the world. Its installed capacity is of 955,000 b/d, although it was severely impacted by the economic crisis. In August 2012 it suffered an explosion that heavily impacted operations since. Last year, PDVSA started focusing investment and repair efforts here.
Amuay is thought to have an installed capacity to refine 645,000 b/d. Cardon has an installed capacity of 310,000 b/d, but it would need significant repairs to resume operations. As of July 2023, they were processing 237,000 b/d, a quarter of the total installed capacity.
EASTERN DIVISION
Orinoco Oil Belt
The bulk of production is now coming from this region, which mostly consists of heavy oil, which in turn needs different processes of upgrading. There are 3 key joint ventures between PDVSA and foreign companies: Chevron in Petroindependencia, Rosneft in Petromonagas, Petrocedeno with Equinor. PDVSA operates Petroanzoategui with domestic capital. Eni and CNPC are other key players in this region.
Initial investments will have to focus on the upgraders, after many years of lack of investment and interruption of operations. The easing of US sanctions will also be crucial to import the different diluents for blending the local heavy crudes. They are necessary to produce more commercially attractive oil for international markets and to produce gasoline for domestic consumption.
The lack of diluents was being plugged by Iranian imports, though still insufficient to meet the demand. With General License 44, Western corporations became the main providers of such diluents. It is not clear if they will be able to continue in the new context of “special licenses.”
Campo Furrial
In the Maturin sub-basin, with 900 million barrels it is considered the second largest oil field in Venezuela, behind the Bolivar Coastal Field. Crudes found here are medium to heavy types—API between 20 and 30 degrees. Despite its capacity, it has particularly suffered the impact of underinvestment.
The broader division of PDVSA Oriente—which covers Maturin and Anzoategui states—sits on 5 billion barrels of recoverable oil, where most of the reserves are light and medium types, especially in the northern wells—fields such as El Tejero, Punta de Mata, and Quiriquire.
Overarching issues
After a significant drop in production from 2014, PDVSA was hit by the US with financial sanctions in 2017, a ban on the purchase of oil in 2019 and secondary sanctions in 2020, among other measures. Since November 2022, the US has started granting limited licenses and comfort letters to oil majors.
A key issue across fields is the depletion of wells, some of which have been pumping crude for over 50 years. There are only two drilling rigs in operation, one being from Chevron’s new campaign starting this year. To put that into perspective, under President Hugo Chavez the average rig count was around 60, and in the 1990s it was near to 100.
New investments in preventive maintenance and security will be essential, especially in strategic facilities such as the Paraguana Refining Complex. There is a severe and almost chronic situation of thefts of sensitive parts of facilities, especially in the Western division, although it is widespread across the country. This factor also contributed to the collapse of production, and will need to be addressed soon.
Current oil minister Pedro Rafael Tellechea is expected to run PDVSA more efficiently than previous administrations. Tellechea has also unusually chosen to be in the public spotlight, announcing new projects on social media and the press. We could also expect reforms to the Hydrocarbons Law from 2006, which has put tight limits on the private sector in the industry.
US sanctions remain the single most important factor in enabling or slowing down the recovery in production. While the text in OFAC regulations is important, sanctions also comprise how they are enforced; are special licenses easy to obtain? Are third parties, like European and Asian firms, allowed to deal with PDVSA or threatened to stay off?
The industry will also need to reinsert itself into the international financial infrastructure. It is currently cut off due to sanctions, overcompliance and PDVSA overseas accounts being seized or frozen. While many payments are carried out in non-conventional methods—including cash and cryptocurrencies—multinational corporations will be wary of trading with PDVSA.
