PdV Orinoco approach is costly, outdated: Rosneft

OREANDA-NEWS. November 02, 2015. Venezuelan state-owned PdV's current approach to developing the Orinoco oil belt should be updated to reduce production costs, said Russian state-controlled Rosneft executive Kim Gobert, in unusually candid remarks delivered at an oil conference in Maracaibo yesterday.

Wellhead extraction costs in the oil belt currently average \\$8/bl, but the incremental use of imported light crudes for use as diluent to manufacture exportable heavy blends have increased per barrel production costs significantly, said Gobert, who is a director of Rosneft's technical expert division.

"The use of diluents improves the Orinoco crude, but it costs money," he said, adding that production costs will likely rise when oil prices rebound in the coming two years and as light crude import volumes climb in tandem with Orinoco output growth.

PdV and its Orinoco joint venture partners have imported over 8mn bl of light crude in the past year from Africa specifically for use as diluent to produce diluted crude oil (DCO), energy ministry figures show.

PdV currently produces 1.325mn b/d of Orinoco extra-heavy crude, including at least 120,000 b/d from the company's new upstream joint ventures led by PetroCarabobo and PetroIndependencia which together produce about 70,000 b/d, a senior PdV executive told Argus earlier this month.

PdV holds a 71pc stake in the 400,000 b/d PetroCarabobo joint venture. Spain's Repsol and India's ONGC hold 11pc each, with 7pc held equally by Indian Oil and Oil India.

PdV also owns 60pc of 400,000 b/d PetroIndepencia, with Chevron holding 34pc stake, a Japanese consortium and Venezuelan firm Suelopetrol own 5pc and 1pc, respectively.

Rosneft holds minority stakes of 16.67pc in 120,000 b/d PetroMonagas and 32pc of 450,000 b/d PetroMiranda, one of seven new Orinoco joint ventures launched in 2010. The company?s breakeven price for the project is \\$40/bl, Gobert said.

Rosneft also holds a 40pc stake in 400,000 b/d PetroVictoria, which was created in 2013 and is not yet producing.

Orinoco upstream operations and recovery factors are difficult, Gobert said.

PdV says that current Orinoco extra-heavy crude recovery factors have climbed to 20pc compared with about 8pc in 2007.

But Gobert said Rosneft's PetroMonagas and PetroMiranda have average crude recovery factors of 8pc.

PdV's current Orinoco upstream development plans are based on plans developed in the 1990s with technologies that are now two decades old, he said.

"We are working in the (Orinoco) oil belt today with the same technology designs in use here since the 1990s," Gobert added. "The technology is good but it's not the only option today, and its results are very long term."

As a result, PdV and its joint venture partners "must re-engineer in the oil belt, see what the market says and think more about technology" with the goal of reducing overall production costs and ramping up exportable crude output quickly, Gobert added, without offering details on an alternative approach.

Neither PdV nor the energy ministry responded to Gobert?s remarks.