Overview of Venezuelan petroleum production and exports
Periods of Venezuelan petroleum production in the last decade has been influenced by politics and labor unrest. For example according to the EIA country analysis brief, in 2002, half of the employees of Venezuela’s nationalized oil company, PdVSA, went on strike and subsequently many were fired. In 2009, President Chavez pushed for further nationalization of the oil sector which would result in a reduction in the amount of money paid to companies that actually do the work of supported oil production and processing. Despite the great uncertainty in the validity of any contract made with Hugo Chavez in charge, there are still many bids from foreign national oil companies and private companies to be involved in the bilateral development of
’s future oil production and refining: Venezuela
In October 2008,
launched the Carabobo bid round, the first held under President Chavez. ... PdVSA would take a majority stake in each project, ... Each project would require a total investment of about $20 billion. ... the blocks could contain at least 12.5 billion barrels of recoverable reserves, and the three projects could eventually produce a combined 1.2 million bbl/d of crude oil. In February 2010, the Venezuelan government announced the results of the bid round. A consortium headed by Repsol YPF [ Venezuela Spain] had secured Carabobo 1, while a consortium led by Chevron [ ] had secured Carabobo 3. The second project, Carabobo 2, went unawarded. USA
I think it is safe to say that any oil produced from these deals is several years away from production. And, once the production facilities are completed, it will be interesting to see if Chavez will come in and “change the deal” to his further advantage, which in turn, will cause lower production rates and lower total production.
According to the EIA, in 2008, of
Venezuela’s total petroleum production of 2.6 mb/d, Venezuela exported about 1.9 mb/d and 63 percent of that (1.2 mb/d) went to the . The EIA further noted that USA Venezuela is attempted to diversify its exports away from the : USA
This amount, 0.12 mb/d to
China in 2008, is only about 6 % of ’s total exports—but the number is probably going to be going up in the future. Therefore, going forward, I would not expect that the percentage of Venezuela Venezuela’s exports to the will be any higher than it present exports, and this percentage will probably diminish. USA
The extent to which
Venezuela’s exports to the USA would diminish would probably depend upon the extent to which can find alternative countries able to refine its heavy oil. According to the EIA’s country analysis brief, as of 2009, 0.96 mb/d of Venezuela Venezuela’s oil was refined in the : USA
USA’s refineries in the are specifically configured to handle Venezuelan heavy crude oil varieties. That amount of 0.96 mb/d is about 50 percent of Gulf Coast ’s total exports. Therefore in the near-term (e.g. the next 5 years) I would expect that Venezuelan exports to the Venezuela would not decrease below this amount. USA
The Caribbean connection—additional indirect exports from
Venezuela to the USA
Additionally, a large amount of
Venezuela’s oil came to the USA via re-exports from the Caribbean refineries, which I also would not expect this to decline in the near-term. According to the EIA country analysis brief for the Caribbean, the United States imported 471,000 bbl/d of petroleum products from the Caribbean.
It seems to me that the EIA’s country report that 1.2 mb/d of
Venezuela’s petroleum exports went to the USA underestimates the total amount of petroleum that end up in the USA by way of the Caribbean refineries. That is, if 0.96 mb/d is refined in the USA and another 0.47 mb/d gets refined in the Caribbean and then shipped mostly to the USA, then the total of Venezuela’s petroleum exports to the is the sum of these two numbers 1.43 mb/d. That would actually correspond to 75 percent of USA Venezuela’s total present exports making its way to the USA. This would make Venezuela the second largest petroleum supplier to the USA, ahead of ’s exports of 1.2 mb/d. Mexico
Indeed, another EIA country analsysis brief on the Caribbean confirms the Caribbean connection between the USA and Venezuela. The Caribbean is a major refining and storage location for crude oil, mostly supplied by
. Most of the refined products are ultimately shipped to the Venezuela . For instance, according to the EIA country analysis brief, the USA Caribbean region has a combined 1.8 million bb/d of refining capacity. One of the largest refineries in the world is the Hovensa facility in the U.S. Virgin Islands, with crude distillation capacity of about 500,000 bbl/d. Hovensa is a joint venture of PdVSA and Amerada Hess, and sent most of its refined product output to the . There a number of other large refineries in the Caribbean: Isla refinery in the Netherlands Antilles, operated by PdVSA (320,000-bbl/d capacity); San Nicolas in Aruba, operated by Valero (230,000 bbl/d capacity); Pointe-a-Pierre in USA (165,000-bbl/d capacity). There are additional refineries in Trinidad and Tobago with a total capacity of about 100,000 bbl/d. Most of the refinery output from the U.S. Virgin Islands, Aruba and Cuba Trinidad and Tobago goes to the . With the exception of Trinidad and Tobago, which produces a significant amount of oil (165,420 bbl/d produced and 124,000 bbl/d exported in 2008), these refineries import their oil mostly from Venzuela. USA
Venezuela’s plans to diversify its exports away from the USA
To cost-effectively export to countries other than the
USA or the Caribbean, the alternative destination country would have to have a similar capacity and capability of refining ’s oil. The two likely candidates targeted by Venezuela Venezuela appear to be Brazil and : China
In late 2009, the Chinese government approved initial plans for a joint venture refinery between PdVSA and CNPC to be built in
province. The two were expected to begin a formal feasibility study for the 400,000-bbl/d project. In November 2009, PdVSA and Guangdong Brazil’s Petrobras reached an agreement over the ownership structure of their joint venture refinery in northern : under the terms of the deal, PdVSA would hold a 40 percent stake in the operating company, and each country would provide half of the crude oil feedstock for the 230,000-bbl/d facility. EIA country analysis brief Brazil
Of course such projects are years away, and rather speculative at the moment. For instance, it would seem that the refining capacity presently in place in the Caribbean could handle all of the crude oil from
Venezuela presently refined in the , in addition to what is being refined now. But this is probably still too close to the USA ’s sphere of influence for Chavez’s tastes. USA
However, if or when these refineries are completed, they could take about 0.5 mb/d of
’s exports. Therefore over the longer term (e.g., 5-10 years) if this petroleum gots diverted away from the Venezuela USA or the Caribbean and, was used internally by Brazil or China, then Venezuela’s exports to the could decrease by about 0.5 mb/d. This, in turn, would accelerate the time when exports to the USA USA from cease altogether as I will show below. Venezuela
Non-linear least squares (NLLS) analysis of total petroleum productionFigure 1 shows total petroleum production for 1965-2009 as reported in the BP statistical review:
It is apparent the
Venezuela’s peak in production occurred in 1970, the same year that the ’s production peaked. The subsequent sharp downturn in production through the 1970 and early 1980’s I think had as much to do with OPEC embargoes and the nationalization of the Venezuela oil industry and the exit of international oil companies as the decline in conventional oil sources. USA
I have focused my analysis on the more recent trend from 1985 to the present.
I have focused my analysis on the more recent trend from 1985 to the present.
The solid blue line is the NLLS best fit to the 1985-2009 portion of data set using the Hubbert equation with the parameters “a,” Qo and Q∞ allowed to vary to minimize the sum of the residual sums of squares (Srss). The best fit (“a” = 0.120; Qo = 5.47; Q∞ = 38.64) looks like looks like a pretty good fit except for the down-turn in production in 2002-2003, probably due to the above-mentioned strikes and firings of the national oil company, PdVSA. Reanalysis of this time span, but with the 2002-2003 data excluded (dashed blue line in figure 1, barely visible at the peak) had a negligible affect on the best fit parameters (“a” = 0.120; Qo = 5.40; Q∞ = 39.08) or on the shape of the predicted production curve. For the remainder of this analysis I used the best fit to the full 1985-2009 data set.
The down trend in
Venezuela’s petroleum production following the local peak in 1998, is similar to the down trend in ’s production in 2004, although it is not as steep. However, if the trend continues, the predicted production by 2015 will be about 0.55 bbs/yr, and by 2020, about 0.34 bbs/yr. Mexico
Non-linear least squares (NLLS) analysis of total petroleum consumption
Figure 2 shows the best fit to Venezuelan petroleum consumption data (as reported in the BP statistical review).
The red line in Figure 3 shows the best-fit of the Hubbert equation to the full data set 1965-2009 (“a” = 0.0322; Qo =2.63; Q∞ = 37.81).
The best fit to the consumption data suggests that the rate of consumption is a long way off from peaking and will continue to increase at about 3.2 %/yr for the next 20 years.
Predicting future trends in Venezuelan petroleum exports
Figure 3 shows the best fits obtained using the Hubbert equation analysis of the 1965-2009 time span of consumption data and the 1985-2009 time span of production data.
The predicted export curve (green line) is calculated based on the difference between the production and consumption curves shown in the figure. Additionally, I show the actual “measured” export data from 1985-2009 (i.e., the BP statistical review reported production minus reported consumption).
The extrapolated export trend predicts that if the Venezuelan’s production trend from 1985-2009 continues, then Venezuelan would have no net exports by 2022. If Venezuelan’s consumption trend from 1965-2009 were to continue then Venezuelan would have import oil after 2022 to meet the predicted increasing domestic demand.
--Updated Nov 28, 2010: as explained in Canada—Petroleum Superpower or Super-slave? --
Figure 4 reproduces the
production and consumption trends, plus Canadian and Mexican exportable petroleum from the previous article, “Trends in Mexican Petroleum Production and Consumption.” USA
The light blue line shows the addition of Venezuelan’s exportable petroleum to the
USA, which equals the predicted total exports (i.e., the green line shown in Figure 3) multiplied by 0.77 (i.e., my estimate that 75% of Venezuelan’s total exported petroleum ends up in the USA directly, or indirectly from the Caribbean connection as discussed above). The figure also shows the measured export data for 1991-2009 for Mexico (open green circles), Canada (open brown circles) and for (light blue circles; total measured exports multiplied by 0.75). Venezuela
The predicted export trend suggests that
Mexico, Venezuela, which was once a major exporter of petroleum to the , is predicted to become a minor supply source in less than a decade, and cease exporting altogether by 2022. USA
Exports to the
USA could cease earlier than 2022 if Venezuela shifted some of its exports preferentially to China and . For instance, if as discussed above, Brazil Venezuela agreed to preferentially deliver petroleum to China and Brazil totaling 0.5 mb/d, (equal to about 0.18 bbs/yr), then the available exports the would be predicted to cease in 2017. And exports to USA China and would still be predicted to cease in 2022. Would it really make sense for China or Brazil to invest in manufacture of refineries if the sources of oil to those refineries ceased in 2022? Brazil
For 2010, I predict that
Canada, Mexico and Venezuela exports together with USA’s domestic production will provide about 54 percent of the ’s predicted consumption. But by 2015, with no Mexican exports and USA Venezuela’s exports down almost 50% from 2009 levels, the USA’s production plus Canadian and Venezuela exports are predicted to provide 46 percent of the USA’s consumption needs, with nothing from . By 2020, Mexico USA production and Canadian exports plus a very small export from Venezuela is predicted to provide 44 percent of ’s consumption needs. USA
Impact on Venezuela
Finally, a note about the implications that the cessation of being an oil exporting county in 2022, would have on
. I expect that this will be an even worse disaster for Venezuela Venezuela than it will be for in 2015, because according to the EIA country report, 75% of total Venezuelan export revenues and half of total government revenues, comes from the export of oil. Mexico