Make gas a priority

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Not gonna happen any time soon
Not gonna happen any time soon

Reading this story on the latest goings-on in the liquified natural gas market, I keep thinking back to 1990, the first time I heard about “Proyecto Cristóbal Colón.”

Venezuela has enormous reserves of natural gas, particularly off its Eastern shores. Decades have gone by, and thanks to populism, lack of clear rules for investment, and simple thuggery, the gas remains there, untapped.

It’s as if we had thousands of public schools, scholarships, or R&D grants sitting on the ocean floor, waiting to be surfaced. And yet we dither, and dither, and dither some more.

Think of what LNG could do to impoverished communities in Sucre and Delta Amacuro. Once this nightmare is over, we need to make LNG a priority, damn the torpedoes.

(HT: OilPrice.com)

1 COMMENT

  1. Wha? Hasn’t Ramírez said Venezuela shall extract gas 888,888,888,888,888 cubic metres of gas by 2015? Setty might want to plot that.
    Look at this:
    http://www.correodelorinoco.gob.ve/tema-dia/este-ano-pdvsa-producira-paria-300-millones-pies-cubicos-gas-por-dia/

    There are so many Cherry cars,
    so much Nicaraguan coffee,
    so many Russian weapons,
    so many litres of EU milk,
    so much US maize and rice
    to import to Venezuela on our quest for the Supreme Social Happiness of our Bolivarian People!
    And the Williams are asking for more money to let Maldonado drive around.

    No volverán!

  2. Estimado Subcomandante Juan,

    And the Tinidadians have been screaming for a decade for Pdvsa to take seriously all the gas they jointly own with PDVSA. (That is another story!)

    But, YES! I believe it is reasonable to say that,

    1. if Venezuela had aggressively developed its offshore gas, then there likely never have (as of yet) been a ‘gas revolution’ in North America. The USA needed gas and the opportunity was there. THAT drove innovation and investment in N. America. But, there was absolutely no shortage of CHEAP and EASY TO EXTRACT conventional, non-associated gas in Venezuela.

    That would mean that there also would never have been the oil portion of the North American “energy revolution” (remember oil fracking was a derivative of the original success of gas fracking)

    However, the attitude was always “real men don’t do gas’ …they do oil. Texans had this hangup too, for a long time in the past. But, now let’s look at oil.

    2. As for oil: If Chavez and ramirez had followed on the initial four demonstration/development projects in the Faja whose initial investments ran out in about 2000 or so, instead of waiting till 2008 to sign the first Faja contacts of his presidency (AND, if the runinous 2003 Paro had never taken place) … then, it is quite likely that the Canadian tar sands would not be viable as they now are. The Faja is very much more accessible than Alberta’s tar sands. (Albertans will even tell you this.)

    It is arguable that, without Chavez, the Faja development might well have been accomplished. However, I doubt that non-associated gas development would have, Old Pdvsa never made significant progress on un-associated gas and would have had to overcome many organizational/managerial and strategic-orientation difficulties to do so.

    Besides Repsol and Eni in Cardon … Venezuela/Pdvsa needs to take the joint fields with T&T seriously.

    • Tom,

      Your 1. is huge overstatement. Even if Venezuela had aggressively developed its off-shore gas the “shale gas revolution” was inevitably to occur. Even if Venezuela had developed, produced and exported all of its gas (…without supplying the domestic market) from all its fields in the form of LNG to the US at the maximum possible capacity, it would have been little (insignificant) in comparison to the gas that was meant to be produced from the different shale plays in the US. Just put it into context. The proved reserves of the whole Deltana Platform is about 9 TCF (which is a huge amount of gas). The proved reserves of the Barnett Shale Play only is 33 TCF (without taking into account Bakken, Eagle Ford, Marcellus, just to name a few). This gas is located in the country with the best environment to do business, with the most attractive natural resources ownership structure accompanied with several tax breaks for unconventional gas activities.

      What happened in fact, is that Venezuela lost the opportunity to develop a domestic gas industry, to create employment, of being self-sufficient in gas, to have enough gas for applying EOR techniques (mainly steam generation) to mature fields and to sell its gas in years of tight market and higher prices. Which is a real shame. However, it’s never too late…

      CB

    • However, the attitude was always “real men don’t do gas’ …they do oil. Texans had this hangup too, for a long time in the past.

      Your statement is an accurate description of attitudes in the oil field. The irony about this statement is that the laws of science dictate that gas deposits will tend to be found at lower depths than oil deposits, meaning that gas wells will be more difficult to drill than oil wells It is harder to drill to 25,000 feet than to 3,000 feet. Really. Don’t real men want to do the more difficult thing?

      Interesting point about the fracking revolution. It was certainly driven by high oil prices. The ability to import cheap quantities of gas would certainly have reduced drilling for gas in the US.

      • Boludo you’re right that Its part of the oil mans lore that crude is king and gas is second best , totally irrational!! , Shell has no such biases , they have for years gone big on natural gas development . Venezuela faces problem that new gas developments require ( as you say) drilling deep wells and the cost of those is sky high ( specially if the gas is sold to the domestic market at ultra cheap prices) stimying their development . The impact of reduced gas production is devastating to petrochemical projects that use natural gas as raw material.

      • “Interesting point about the fracking revolution. It was certainly driven by high oil prices. The ability to import cheap quantities of gas would certainly have reduced drilling for gas in the US.”

        Absolutely right but it does not matter anymore. There are Japanese companies and European countries, like Statoil ,committed to the exploration of natural gas in the Us. In 2005, an acre in Wyoming Co, Pa went for maybe, 50 dollars. Now, you cannot get anything for less than 3,000.00 dollars.

        • In 2005, an acre in Wyoming Co, Pa went for maybe, 50 dollars. Now, you cannot get anything for less than 3,000.00 dollars.
          Yup. A member of my extended family works for an oil and gas company’s land office in western Pennsylvania, purchasing mineral rights. $3,000 per acre is what he told me a several years ago.

          • This is a bit of trivia…One of the Japanese companies involved in the Appalachian Basin is Mitsui , which happens to be a partner of Anadarko. Anadarko’s seismic crew contractors was stopped by the Venezuelan army few weeks ago while trying to shoot some seismic lines off the coast of Guyana.

          • Mitsui is one of the largest Japanese tsaibatsu , they”re huge and have their fingers in a thousand pies , they are more in the nature of a multi faceted trading company than an oil company.

          • …another trivia back to you: Anadarko is a minority shareholder (18%)
            in the “Empresa Mixta” Petroritupano. Some years ago, it tried to sell its interest and even signed a SPA with a potential buyer but the Ministry of Petroleum didn’t approve the transaction.

  3. Oh, so now the Canadian tar sands are “remote”? As we Canadians can tell you, just because something is 8000 miles north of Montana, that does not make it remote. And there are many places more north, such as the Greater Tuktuyaktuk Metropolitan Area. Tom O’Donnell has not truly understood the meaning of the phrase–prominent in the advertising of our Ministry of Supreme Tourist Happiness–Canada is “friendly, familiar, foreign, and near.”

    Mongolia=remote. Tar sands=near.

  4. Ha! I love it. I grew up nodding off to the Canadian national anthem after watching the late show in Buffalo and for me it was never ‘remote’! Welll, some parts were…

    The point I was thinking about was the problems with bringing Alberta oil to market. There is the Miillenium Pipeline option, and there is the idea of instead going over the Rockies (through lots native peoples’ lands who have objections) or to the East (trains, etc.) In comparison, Venezuela’s Faja is “close to water’ in comparison, and hence the global market. But, the Canadians are solving the difficulties.

  5. Ok, well, if you are from Buffalo, you probably do know some of our fleshpots, such as Fort Erie or Welland. Your larger point is interesting; the pipeline over the Rockies goes through native lands, and they have substantial legal authority to prevent traversal. In Venezuela, of course no one has any rights in practice, but I believe the proposed pipeline to the Pacific also crosses aboriginal lands. What about the Faja?

  6. To State that the shale revolution would not have happened if Venezuela had developed its gas, is a bit far fetched. It would have occurred irregardless, though definitely maybe not at the speed at which it has developed. Nevertheless, as Mr. Bellowing correctly states, it is never too late, but just don’t hold your breath waiting for it to happen any time soon with the band of incompetents running the show today.

  7. Somehow I suspect that what made the shale and tar sand developments possible was globalization , its impact on China’s tremendous economic growth and the consequent rise in its oil imports creating an increased oil demand which led to the US$100 bl . At US$100 a bl, oil prices made the alternative of exploiting the shale and tar sands deposits a very profitable proposition . About Ramirez declaration he forgets to mention that after Shell , Exxon and Mitsubishi decided to leave the Cristobal Colon project , they tried to convince Petrobas to join the Project but the economics at the time were not there , specially where so much of the gas had to be sold internally at give away controlled prices. Also not mentioned are the many troubles Pdvsa has had to begin a timid development of these resouces ( there is a bit of a stink about some of the contracts signed by Pdvsa with external contractors , if in doubt ask Dr Coronel) . Chevron has been slow in developing the orinoco delta area which in part dependent of venezuela entering into crossborder share exploitation deals with Trinidad . Meant time some of those crossborder deposits are being speedily exploited by Trinidad licensed companies who are syphoning off the gas on Venezuelas side of the maritime border , the more time passes the less gas will remain.

  8. The lucky break for Venezuela is the discovery of the western venezuela offshore natural gas deposits by Repsol : Pdvsa is moving fast to get Repsol and others to start exploitation of this discovery as soon as possible , giving them fair prices and other facilities that otherwise would not be forthcoming . The reason is that the shortfall in gas production in western venezuela is becoming critical forcing the abandoment of production in gas lifted fields in lake maracaibo , cuts in the production of certain refinery products and a dependence on gas supplied by Colombia under a contract that expires some months from now and which if renewed would force Pdvsa to pay Colombia a huge penalty .
    Extra heavy crude from the orinoco belt is probably easier to exploit than the Canadian Tar sands , the orinoco oil is very viscous but not outright solid , easier to exploit and transport , the faa oil deposits are shallow not deep , the deposits are closer to shore and once upgraded the oil can be transported via oil carrier to any place in the world . the production costs I believe are lower despite the need for the building of expensieve upgrading refineries . problem of course is the business climate and the high transactions costs of any business venture in venezela .

  9. I wonder how the “Perla” gas is going to get marketed. Is the gas going to be consumed internally? What price are they going to get for their gas if it is sold for internal consumption?

    If they are allowed to export gas, are they going to export gas as LNG? This (LNG)is certainly a tough market at todays gas prices. Are Repsol and ENI going to build an LNG plant? Where will they sell their LNG? Certainly not the U.S., there is plenty of cheap gas in the U.S.
    Argentina doesn’t look like they will be needing gas in the long term.

    I remember during the early 1980’s PDVSA was exploring for gas in Northern Guarico, to replace the 30,000 bopd that they were burning in thermoelectric plants in Caracas.
    Que paso con eso?

    It certainly is cheaper to produce gas from onshore rather than offshore, especially if you have the fields and wells already drilled. Offshore rig-rates are very much higher than those for onshore rigs.

    The Anaco fields discovered in the late 1949’s have been injecting gas for pressure maintenace for the last 50 or so years, they could get a lot of cheap gas if they blew down some of their oil and condensate depleted reservoirs.

    Offshore gas in Venezuela looks like a tough nut to crack, especially if you are a foreigner and have to sell to an internal market at local prices, or build an LNG train and export to a gas saturated world market.

  10. Probably you already know this, but the “official” reason we’re importng gas from colombia is that the gas we produce that could be used for internal comsumption is being compressed and pumped into the oil wells as to increase their pressure and improve oil production, because its more profitable to sell a barrel of oil at 100USD than whatever you could make out of gas, and by buying gas from colombia, yes, we spend money on that gas, but we make a lot more from oil. (PDVSA-GAS employee dixit)

    Let’s assume that is right, then, why in the name of $deity don’t we have more gas production as to feed the wells AND meet our internal demand without having to buy from anyone else (and, y’know, make even a dime out of LNG), specially with so much untapped reserves?. Y’know, it’s been like a lot since this government is in power, and since they’re all a bag of panscrappers then by generating more income they could scrap more dough :S

    Let’s assume that we’re mere mortals unable to understand the higher reasoning of the government that decided to do so, well, back on 2009-2010 hitachi and pdvsa were in talks for a plan that consisted in installing hitachi gas turbines to a) counter the electrical deficit and b) use waste heat from the turbines to run high pressure steam generators that would produce high pressure steam to be injected on oil wells to do precisely what they’re doing with gas. Then, why in freaking’s $deity name they didn’t do it? Two birds, one stone, heck, they could have given it to derwick so they would hire hitachi!

    The whole PDVSA directive deserves to be colonized with the thickest,most viscous, and highly corrosive petroleum the fatherland can give…and in this context colonized is a verb more related to bowel cleansing that with imperial invasions

  11. Gas has many uses , it supplies the needs of homes commerce and industry in built up areas , it can be used to generate electricity , it can be converted into petrochemical products, it can be used in secondary oil recovery processes , it can be used to help certain refinery proccesses , Western Venezuela is deficitary in gas deposits , The needs of the area are much greater than available supply . You cant cut supplies to urban areas because of the political ruckus it would cause , you cant cut the gas inyected to keep production going in lake maracaibo , you cant cut the production of resins and other petrochemicals by cutting the gas it feeds on. What do you do ?/ You import gas from colombia under a deal thats supposed to be temporary because you figure that there is gas to be found eventually on the venezuelan side of the border . The Perla field is discovered thanks to Repsol , the needs are becoming desperate , you offer to buy all the gas produced at the field at a good price provided Repsol and partners move fast to begin production . Every day that passes you have problems to meet all the supply needs and getting the gas on stream is urgent., if you get more oil production then that pays for Repsols high gas prices and allows the colombian supply to be replaced , some of the Perla gas may go into projects for producing procesed products that can be sold into the international (not necessarily LNG) . You have two big hurdles to overcome , you havent got available money and you havent got the expertise needed to carry any complex projects however advantageous . You must rely on foreign investors many of which know that the govt cant be trusted to perform on its promises and commitments , not even to pay its obligations and debts !!

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