Caracas fetes arrival of offshore gas supply

Venezuelan state-owned PdV celebrated the official arrival of natural gas supply from the offshore Perla field run by Spain´s Repsol and Italy´s Eni.

In a high-profile 1 August event, PdV started receiving around 150mn ft3/d of gas from the 16.3 trillion ft3 field, located in the Cardon 4 block in the Gulf of Venezuela. The gas is piped to a processing plant at Tiguadare on the Paraguana peninsula.

The $5bn Cardon 4 project is scheduled to reach 450mn ft3/d at the end of this year. Production should ramp up to 800mn ft³/d from 14 wells in mid-2017, and a peak of 1.2bn ft³/d from 21-26 wells in 2020.

As the project offtaker, PdV is currently paying Repsol and Eni about $3.96/mn Btu for the gas, which will enable the company to displace up to 55,000 b/d of diesel currently used in thermal power stations and petrochemical plants in western Venezuela. The gas should also help to reboot underutilized fertilizer plants near the 146,000 b/d El Palito refinery in Carabobo state.

The projected cost savings and revenue growth from reduced diesel imports and increased fertilizer output "more than offset PdV's gas purchase and sales price differences," a PdV Gas executive tells Argus.

Venezuela´s first-ever offshore gas project remains in foreign hands a month after production began, highlighting state-owned PdV´s apparent inability to finance its direct participation.

A preliminary 2014 agreement for Repsol and Eni to loan PdV $1bn to finance its entry into the project with a 35pc stake, as per the country´s gas legislation, has not materialized. If it does, Repsol and Eni would remain with 32.5pc apiece.

A separate export-oriented venture known as Perla 3X to develop the field´s associated condensates, which belong to PdV, has not gotten off the ground yet, Repsol says.

Under another preliminary agreement also signed last year, PdV would lead Perla 3X with a 60pc stake, according to the country´s 2006 oil legislation that caps foreign ownership at 40pc. PdV´s European partners would hold 20pc apiece.

PdV has said the field should produce 24,000 b/d of condensates by 2017, rising to 28,000 b/d by 2020. The energy ministry maintains that discussions with Repsol and Eni on the condensates venture are ongoing.

The 100pc foreign control of Perla, the largest industrial project in Venezuela since the 1990s, stands out against the backdrop of longstanding Venezuelan government policy that is grounded in state control over the oil-based economy.

At the Cardon 4 ceremony, Maduro unveiled the broad outlines of PdV's 2016-25 plan that reaffirms the Orinoco heavy oil belt as the cornerstone of Venezuela's oil industry.

PdV touted an ongoing upgrade by Korea´s Hyundai and China´s Wison of the 190,000 b/d Puerto La Cruz refinery, which will be retrofitted to process 16°API Merey crude, the result of blending Orinoco extra-heavy crude and light grades. An increasing share of the light crude needed for blending is coming from abroad as PdV´s own light and medium crude production declines. The company is currently weighing bids for long-term supply of light crude.

Petrosanfelix, a new PdV subsidiary that transformed its 110,000 b/d PetroAnzoategui heavy crude upgrader at Jose into a 60:40 joint venture with state-owned heavy industries group CVG, will be used to provide financial backing for 21 new local oil services and equipment companies at two planned industry support complexes that PdV is developing in the oil belt's Carabobo and Junin sections.

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