Page 8 - LatAmOil Week 45 2019

LatAmOil VENEZUELA LatAmOil
 Venezuela saw oil output peak at 3.8mn barrels per day in 1970 and was still producing about 3.3mn bpd in 2005, before then-president Hugo Chavez nationalised the industry. Yields have plummeted since then, and the country is now extracting only about 600,000-650,000 bpd.
In the face of this decline, many of PdVSA’s former customers have turned to other suppli- ers. For example, Spain’s Repsol is looking into the possibility of buying heavy crude from Can- ada, Bloomberg reported earlier this week.
The country’s oil-processing sector is also operating far below capacity. Venezuela is home
to six refineries that are capable of handling about 1.28mn bpd, but none of the plants is working at full design capacity.
One facility, the 187,000 bpd Puerto de la Cruz plant, has remained offline all year because it cannot obtain the spare parts it needs for repairs. Another, the 310,000 bpd Cardon refinery, suspended operations earlier this year because it was not receiving enough crude oil to continue working. Meanwhile, the 140,000 bpd El Palito plant operates only sporadically, owing to a lack of feedstock and intermittent electricity outages. ™
GUYANA
Tullow reveals quality of Guyana oil find
TULLOW Oil (UK/Ireland) has suffered a set- back in Guyana, where it is developing the off- shore Kanuku and Orinduik blocks.
On November 13, the company revealed that laboratory analyses had shown that the hydro- carbons found in Joe-1 and Jethro-1, the two wells drilled at Orinduik, consisted of heavy sour crude. This will affect the economic viabil- ity of the project, since heavy grades are more difficult and costly to extract. Moreover, sour crudes must be processed more extensively to bring their sulphur content down to levels that comply with current emissions requirements.
Tullow has acknowledged these problems. In a statement, it said: “Tullow and the joint ven- ture partners are assessing the commercial via- bility of these discoveries considering the quality of the oil, alongside the high-quality reservoir sands and strong over-pressure.”
George Cazenove, a spokesman for the com- pany, spoke similarly. On November 13, he was quoted by Bloomberg as saying: “The commer- ciality of both discoveries is still being assessed and our options are being reviewed. The quality of the reservoir and the significant over-pressure are positive, and while oil of this type is sold in global markets, we need to do more work on the various parameters.”
The news has taken a toll on Tullow’s stock, not least since it has come at a time when the firm is also experiencing difficulties in Ghana and Uganda. On November 23, the company’s share price fell by more than 20%. (Likewise, Canada’s Eco-Atlantic Oil & Gas, one of Tullow’s partners in the project, saw its shares drop by as much as 49.9%.)
Al Stanton, an analyst at RBC Europe, called this development logical. “We expect investors to worry about the projects’ value,” he said in a note on November 13.
Nevertheless, Tullow said in its statement that it was not giving up on Guyana. “Tullow remains confident of the potential across the multiple prospects” identified at the Orinduik and Kanuku blocks, and exploration drilling will continue, it declared.
The company further noted that work was currently underway at Carapa-1, the third well to be drilled at Orinduik. Results from this drill- ing project will be available by the end of the year, it said.
Eco-Atlantic also tried to strike an opti- mistic note, pointing out that some aspects of the Orinduik block’s geography were favoura- ble. Colin Kinley, the company’s chief operat- ing officer, said: “Having spent three decades working within the heavy oil industry, we are very encouraged by the initial analysis of these wells and good parameters that define poten- tial pathways to recovery. The fact that the oil is already hot in the reservoir, and mobile, and has high-quality porous sand to travel through, helps to eliminate a great part of the conven- tional heavy oil challenge.”
Kinley added: “Having 8500 PSI in the porous warm formation is an added advantage to drive the oil to the well. Horizontal well tech- nology can allow excellent access to these thick fields and generally reduces the need for multi- ple additional wells, leading to lower develop- ment cost per barrel.”
Equity in the Orinduik project is split between Tullow, with a 60% working interest, Total (France), with 25%, and Eco Atlantic, with 15%. ™
Orinduik block (Image: Eco-Atlantic Oil & Gas)
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Week 45 14•November•2019