Lack of gas thwarts Venezuelan iron ore revival

OREANDA-NEWS. April 02, 2015. A lack of consistent natural gas supply is thwarting Venezuela?s efforts to revive iron production and processing industries in Bolivar state, according to executives at local iron briquettes companies.

Interruptions in gas supply from state-owned PdV have forced Comsigua and Briquetera del Caroni to reduce or shut down briquettes production a combined half-dozen times since both companies resumed operations in January 2015, the executives said.

Briqven and Briquetera Orinoco also reported frequent gas supply shortfalls during first quarter 2015 to the national briquettes consortium (CBN) that functions as a holding company for the four state-owned briquettes makers that were nationalized in 2009.

Gas supplies were disrupted again last weekend after PdV reported "armed commandos" had attacked a flow station at El Tejero in Monagas state, forcing the temporary shutdown of 80,000 b/d of 23?API crude oil production and up to 1.2bn ft3/d (33.6mn m3/d) of gas.

PdV said production operations in Monagas have since returned to normal. But briquettes production in Bolivar is still affected, Briqven said. "We're not getting all the gas we need yet," a company executive said.

Comsigua also was forced to shut down briquettes production completely for three days from 16 March after PdV industrial gas deliveries stopped unexpectedly.

"The state's strategic industries like (iron producer) Ferrominera Orinoco, (steelmaker) Sidor, the briquettes producers and the aluminum companies suffered drastic power supply cuts in 2009 of over 1,000MW that continue today. Gas supply deficits also are more frequent since 2009. The power and gas that the government took away from the strategic industries were reallocated to the rest of the country," a Briqven executive told Argus.

PdV says its upstream gas operations and deliveries to the iron and aluminum sectors in Bolivar are normal. "The industrial market's gas needs in Bolivar are being supplied," PdV Gas said.

Briquettes producers in Bolivar are hoping new gas production that PdV has pledged to bring on stream in 2015 will eliminate a critical bottleneck in the recovery of Venezuela's iron pellets and HBI production.

PdV expects to start production of up to 750mn ft3/d this year, including up to 450mn ft3/d from the offshore Perla joint venture in the Gulf of Venezuela. PdV has a 35pc stake in Perla, with Spain?s Repsol and Italy?s Eni each holding 32.5pc.

First gas from the Perla field, located in the Cardon IV block, is expected by August after a Mexican-built platform arrives at the site.

Another 300mn ft3/d would come from PdV's offshore Mariscal Sucre development in an area slightly north of the Paria Peninsula in eastern Venezuela. PdV said production will start this year, but declined to give a specific date.

PdV will place all of the new production locally, with substantial but as yet unspecified volumes earmarked for state-owned Corpoelec's thermal power plants, which currently consume almost 300,000 b/d of diesel and fuel oil, of which about 115,000 b/d is imported.

Iron pellets and briquettes producers in Bolivar, including FMO and Sidor, are lobbying the energy ministry and PdV for gas supply guarantees to drive the government's ambitious plan to boost non-oil exports to \\$10bn annually within five years.

Venezuela's non-oil economy currently has a gas deficit of over 2bn ft3/d, energy ministry figures show. Independent local gas executives say the deficit is closer to 3bn ft3/d.