Venezuela development plan for Orinoco oil belt

[Judi Lynn]

Venezuela development plan for Orinoco oil belt
Fri Apr 2, 2010 9:03pm BST

April 2 (Reuters) - Russian companies and
Venezuela will invest between $60 million and $80 million this
year in the Junin 6 block in Venezuela's vast Orinoco heavy
crude belt, a senior Russian oil executive said on Friday.

PDVSA and a Russian consortium, which includes state giant
Rosneft (ROSN.MM) and private major LUKOIL (LKOH.MM), agreed in
February to set up the project in the belt's Junin 6 field.

On Wednesday, Caracas said it would begin producing 50,000
barrels a day by the end of this year, and that the Russian
companies would pay Venezuela a first tranche of $600 million
on Friday -- out of an agreed total of $1 billion -- for the
right to take part.

It is part of a massive plan to develop the Orinoco oil
belt -- considered one of the largest in the world -- that is
slated to add 2.1 million barrels per day of new production.

The PDVSA-run projects are mostly set to begin producing
tar-like Orinoco crude by 2013, with a total investment of some
$80 billion. Upgraders to turn that crude into lighter
synthetic oil will be ready several years later.

http://uk.reuters.com/article/idUKN0214218320100402?rpc=401&feedType=RSS&feedName=governmentFilingsNews

[protocol rv]

1. The guy who wrote this is very confused

It's impossible for the Russian consortium to produce 50 thousand barrels per day by the end of the year. If you pay close attention to what Rafael Ramirez said, the exact words were "50 thousand barrels" without the per day. That volume is more likely. It is also a meaningless figure.

The amount to be invested this year is peanuts. But that's understandable because the Russians don't have the people in Venezuela to get the work done, nor have they hired Venezuelans. And PDVSA doesn't have anybody either.

The problem with the "massive plan", as far as I can observe, is the lack of activity. They don't seem to be hiring, contractors are not in place, and they don't have the financing for the huge amount of money they have been mentioning. Given the bad shape of the Venezuelan economy, PDVSA's poor payments record, and Chavez' tendency to nationalize, I doubt the banks will make the loans unless they get international arbitration. So something has to give, either Chavez proceeds with contract arrangements that give banks and companies the right to sue him outside Venezuela (the way ExxonMobil is doing it at ICSID), or the they won't invest.

Comments? Or is this too complicated?

[ChangoLoa]

2. It's per day

A 2% rise in the production to compensate the 20-25% overall decrease.

Nonetheless, they're just ANNOUNCING once again. Every year it's been the same and the only result is been the fall in the production. WHEN I SEE IT, I'll believe it. Just hope it won't be like the 15 previous blah blah times.

[protocol rv]

3. Well, if they mean per day, it's a lie

The areas in question don't have pipelines to ship the crude, nor the oil degassing equipment, nor do they have the wells drilled. And it's about to start raining, which means they can't do the civil works to prepare the bases for the drilling rigs, or the facilities. And of course nobody in their right mind can weld so much pipe in the rain. So the whole idea is just another figment of their imagination. Remember the famous Cruz del Sur gas well? It's not producing gas. And the gas discovery Repsol made offshore Paraguana? it's not producing either. I also heard PDVSA isn't even paying their share of the cost of the Pernambuco refinery being built by Petrobras. They do nothing but sign agreements and brag. But they get nothing done.