In a fresh attempt to contain a fall in oil production, Venezuela's state-owned PDVSA announced two alliances with Chinese and Bulgarian companies to reactivate 931 wells in Lake Maracaibo, with the objective of adding 50,600 b/d and 43 MMcf/d of natural gas to output in the short term.
"China-based Shandong Kerui Group Holding Co. will repair 624 wells, with financing of $30 million provided by the Chinese company," PDVSA said Thursday.
"Also, PDVSA and the Bulgarian-Venezuelan Consortium Aleco are discussing reactivating 307 wells in Lake Maracaibo, with financing of $100 million that would come from the Bulgarians," PDVSA added.
In September, PDVSA President Eulogio Del Pino, who also is oil and mining minister, said the company will drill 480 wells in the Orinoco Belt in the next 30 months, with the participation of international companies such Schlumberger and Horizontal Well Drillers, as well as Venezuela's Y&V, Halliburton and Baker Hughes.
"The goal is to increase production by 250,000 b/d with an investment amounting to $3.2 billion," Del Pino said in September.
On Monday during an interview broadcast by state television, Del Pino said that the 'well drilling and rehabilitation projects in Lake Maracaibo as well as in the Orinoco Belt are structured with a contract scheme so that financing is paid with future crude output."
PDVSA's growing debts with its oil field service providers is paralyzing upstream development. Of the 373 wells drilled last year, 51% were contracted to international service companies, which have gradually been halting work due to non-payment.
"There is a sustained decline of production of light crude, which has not been compensated for with production of heavy and extra heavy crudes," a source in PDVSA's exploration and production division said on condition of anonymity.
CONFLICTING PRODUCTION FIGURES
On Thursday, the Oil and Mining Ministry said that Venezuela's crude oil production in September averaged 2.334 million b/d, up 0.2%, or 6,000 b/d, from 2.328 million b/d in August.
The increase was attributed to greater output from the Orinoco Belt, the ministry said in a release Thursday.
But over the longer term, Venezuelan oil production has been falling steadily since January 2015, when it totaled 2.812 million b/d.
Contrary to the Venezuelan report, S&P Global Platts' latest OPEC survey showed Venezuela averaged 2.1 million b/d of crude oil production in September, a 20,000 b/d decrease from August.
The production of light crude fell to 374,000 b/d in 2015 from 416,000 b/d in 2014, according to official data. The figures for 2016 are not available yet, but output continues to decrease.
The most pronounced declines occurred in the light crude fields in western Venezuela, especially those located in the Lake Maracaibo basin, the PDVSA E&P source said.
Declines in eastern Venezuela have been less pronounced. But still, output at El Furrial and Pirital, between Monagas and Anzoategui states, continues to show signs of depletion, the source said.
To make up for the growing deficit of light crude, PDVSA has since the end of 2014 been importing cargoes of light crude from Nigeria, Algeria, Russia and the United States to process at refineries in Venezuela and Curacao for its export mixtures and for upgraded extra heavy crudes.
But PDVSA continues to face cash flow problems, and imports have slowed. The lack of light crude supply also hurts PDVSA's diluted crude oil (DCO) production, which in turn means less revenue on exports and compounds the company's cash problems.
"Assuming an average weighted blending ratio of around 22%/barrel and assuming there's broadly between 50,000-100,000 b/d of diluent material they can't get their hands on, that's around 250,000-500,000 b/d of DCO at risk," said FGE analyst Thomas Olney in an email.
LACK OF LIGHT CRUDE IMPACT
In August, due to a lack of feedstock, PDVSA shut two crude distillation units at its leased 335,000 b/d refinery on Curacao island.
Light crude imports from the US to Curacao have been falling for several months and dropped to zero in July, according to the latest US Energy Information Administration data.
PDVSA has also had to reduce rates at its domestic refineries in Venezuela due partly to a shortage of light crude.
"We have reports of low availability of light crude, which is an important component of the crude diet processed at the refineries," said oil workers union leader Ivan Freites.
"PDVSA maintains processing levels below 50% at its refineries because restarts at basic units are months behind schedule and there is not enough crude to process," Freites said.
PDVSA's largest refinery, at Amuay, is operating at 49.6% capacity or 320,000 b/d.
The Cardon refinery is operating at 38.7% capacity or 120,000 b/d, according to a technical report seen by Platts on Thursday. The two refineries, with 645,000 b/d and 310,000 b/d maximum capacities respectively, comprise the Paraguana Refining Center, or CRP, in northwestern Venezuela.
PDVSA's 140,000 b/d El Palito refinery had been shut since April, and the company is conducting maintenance there through October.
Also, PDVSA's FCC unit at the 187,000 b/d Puerto La Cruz refinery has been closed since May 1.
