Blast from the Past Chronicles: Orimulsion Edition

Yummy, yummy orimulsion. Great on toast.

The Capriles Campaign’s decision to bring back Orimulsion from the dustbin of failed innovation history has introduced something the campaign had almost completely lacked until now – an actual policy debate between the government and the opposition. ¡Habrase visto!

Orimulsion was a late-80s, early-90s made-in-Venezuela solution to the problem of what to do with the zillions of barrels of tar (because let’s be clear, “extra-heavy crude” is a euphemism for tar) under the Orinoco watershed. Some eggheads at Intevep figured you could emulsify it by whisking water into it (just like a vinaigrette), and you could then burn the emulsion at minimally-reengineered coal-fired power plants. (Obviously, that also means Orimulsion sells for about the price of coal.)

At a time when there was no practical way to refine Orinoco tar into higher value products, Orimulsion made good sense, and PDVSA had moderate success marketing the stuff abroad.

But the advent of tar upgraders in the 1990s largely pulled the rug from under the Orimulsion market. Once we had the technology to turn orinoco tar into conventionally refineable “synthetic crude”, there seemed little reason to keep treating it like coal. And so the new PDVSA ended up ditching Orimulsion, (and, incidentally, defaulting on a bunch of long-term supply commitments in the process.)

The problem, of course, is that the high-tech upgraders you need to pre-refine tar into syncrude are complex and very, very expensive, and the Chávez government has completely failed to bring new ones into line. This has become a major bottleneck in efforts to develop the Orinoco Tar Belt, as absent new upgraders you’re stuck having to dillute low-value tar with high-value crude to make mixtures able to be processed. But the higher-value oils are scarce in Eastern Venezuela, and their production has also become a bottleneck.

Capriles is now floating a carefully hedged appeal to consider re-launching Orimulsion production (“evaluar los costos de retomar la producción del combustible y de adaptar las plantas eléctricas existentes a su uso” is what his program calls for.) In the current context – with no new upgraders, and too little dilutant crude – relaunching Orimulsion might just make some sense, as a short-term fix to the problem of raising quick cash to finance upgrader construction.

But we shouldn’t fool ourselves with feel-good invented-in-Venezuela stories: Orimulsion was a miserable compromise, a grubby waste of national resources born of a lack of better technological options. Returning to it is something you’d only consider out of sheer desperation: with oil prices in the triple-digits, selling oil for coal-prices is the equivalent of burning heirloom furniture for heat.

And so, on the one actual policy debate of the campaign so far, I find myself in the uncomfortable position of siding largely with the government!

Though, of course, in the larger scheme of things the chavernment tiene razón pero va preso. If PDVSA had managed to bring even a single upgrader online in the last 14 years, we wouldn’t be having this sad, 80s-style debate in the first place. That people are seriously thinking of returning to Orimulsion is depressing, but that we lack better options is even worse.