venezuela: a key player energy equilibrium and · 2010-09-22 · pdvsa’s 2005 crude's and...

Embassy of the Bolivarian Republic of Venezuela

Venezuela: a key player Venezuela: a key player for the hemisphere for the hemisphere energy equilibrium and energy equilibrium and securitysecurity

Embassy of the BolivarianEmbassy of the BolivarianRepublic of VenezuelaRepublic of Venezuela


•• Market fundamentalsMarket fundamentals

•• Venezuela strategic position in energyVenezuela strategic position in energy

•• Venezuela Venezuela –– U.S. bilateral energy U.S. bilateral energy

relationshiprelationship

•• Energy security in the western Energy security in the western

Hemisphere Hemisphere

Guidelines


Current Market Fundamentals

• Slow recovery of Iraq and few hope for the short term• The Iran and North Korea crisis• Instability in the Middle East and Africa• Speculation of the Financial Market• Oil addiction in developed countries - no sign for changes in consumption

patterns

• End of cheap oil – no new discovery of mayor reservoirs• Production decline and lack of spare capacity• Very tight refining capacity• New unforeseeable demand in Asia – supply lock-in by China • High taxes in consuming countries, specially in Europe• Lack of investment – Majors are investing less than 10% of the investment

needed to meet oil demand

Political ElementsPolitical Elements

Technical ElementsTechnical Elements

The world is unsustainable under the current consumption pattern of the developed world and

under the current geopolitics of oil


Venezuela Position Venezuela Position on Energyon Energy


Oil World Reserves

Source: Oil & Gas Journal, December 2005

Venezuela, including the Orinoco Belt, is the country with the world’s largest liquid hydrocarbon reserves (316 billion bbl)

Latin America (excluding Venezuela) 2%

Middle East & Iran49%

Venezuela21%

Canada 13%

Africa 7%Europa 7%

Asia Pacific 2%

Total World Reserves 1,527 Billion Barrels

80

236

316

Proved

Orinoco Belt (in process of certification)

Venezuelammmbbl


Natural Gas Reserves

Source: Oil & Gas Journal, December, 2005

Venezuela 35049%

North America 24934%Latin America

116 17%

Western Hemisphere Reserves715 Trillion Cubic Feet (TCF)

Venezuela has the potential to become the 4th largest country in gas reserves and the 1st country

in gas reserves in the western hemisphere

39%

Qatar 91114%

Iran 971 15%

Russia 1680 27% Asia Pacific

West EuropeNorth AmericaAfricaRest of Middle EastLatin America

World Gas Reserves6,312 Trillion Cubit Feet (TCF)

Venezuela6%

151 - 26.1 - Proved 152 - 34.3 - Estimated (Offshore)350 - 60.4

TCF mmmboe

Venezuela


Venezuela’s Total Hydrocarbon Production

Source: 2000-2004 PDVSA’s 20-F, 2005 Est.

0.0

1.0

2.0

3.0

4.0

5.0

2000 2001 2002 2003 2004 2005

Natural Gas

LPG & Condensates

Light

Medium

Heavy & XH(include 3rd party)

Third Party Crudes

MMBPDOE

4.1 4.23.8

3.64.0 4.1

16%

5%

19%

24%

25%

11%

Note: 1 barrel of Oil Equivalent (OE) = 5,800 cubic feet of natural gas

Venezuela’s production, including natural gas, exceeds 4 million bpd oil equivalent


PDVSA’s 2005 Crude's and Products Flow (mbd)

Refined Product

Sales

Crude Sales

Crude & LPG

Production

Refined Product

Purchases (Wholesale)

Crude Spot Purchases

Refineries Abroad

Crude Exports

Local Refineries

Local Market

PDVSA’s Supply Disposition(does not include Faja third party)

Product Exports

Consolidated Sales

506

650

1,831

1,204

2,628

1,156

1,472

627

International Activity

Embassy of the Bolivarian Republic of Venezuela PDVSA FINANCIAL STATEMENTPDVSA FINANCIAL STATEMENT

Income Statement (US $ million)Income Statement (US $ million)

Source: PDVSA Audited (IFRS)

Audited Audited

2003 2004 2005

International Sales 44,178 60,972 81,105

Venezuela Sales 961 1,227 1,408

Other Income 1,450 2,558 3,217

Total Income 46,589 64,757 85,730

Crude & Product Purchases 21,016 24,649 32,979

Exploration & Production Expenses 9,400 13,492 14,763

Depreciation & Amortization 3,042 3,082 3,334

Royalties 6,428 9,247 13,318

Interest Expenses 684 456 190

Other Expenses, Net 1,175 1,764 1,937

Total Costs and Expenses 41,745 52,690 66,521

Earnings before Taxes 4,844 12,067 19,209

Social Development Expenses 249 1,242 6,909

Income Taxes 1,318 5,419 5,817

Net Income 3,277 5,406 6,483


Venezuela’s Crude Oil Production

Source: 2000-2005 PODE, 2006-2012 PDVSA

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Risk Sharing Exploration

New JV & Projects

Own Operations

Existing Joint Ventures

Operating Joint Partnerships

3.2 3.33.0

2.83.1

3.3 3.43.8

4.1

4.64.9

5.55.8

MMBPD


CAPEX: 75.735CAPEX: 75.735 OPEX: 48.224OPEX: 48.224

55.928

19.807

39.781

8.443

PDVSA 3rd Parties

Total: 123.959

Business Plan 2006-2012 (billion US$)


Production Schemes

PDVSA

Pro

duct

ion

Sch

emes

Unconventional oil & gas drilling (fracture stimulationand horizontal drilling).

Secondary recoveryWater & gas injection

Slant drilling/horizontalDrilling, commingle wells

Private participant involvedOn offshore drilling and production by special rigs (jackups, drill ships, semi submersible)

Traditional Areas

Onshore

PDVSA60 – 80%

Private Participation (operates)20 – 40%

Offshore

Third PartiesOperate100%

Own Operations Operating Joint Partnership Private

PDVSA51%

Private Participation (operates)

49%

Traditional Areas Orinoco Belt

Key Drivers:


Remaining Estimated Reserves 1,04477%

To Be Quantified 236

17%

Proved 392.9%

Proved Developed 4.00.3%

1,360 Billion Barrels Estimated

MACHETE

R í o O r i n o c oBOYACA JUNIN

CARABOBO

AYACUCHO

Total Area Orinoco Belt 55,314 Km2

Orinoco Belt

Only 0.3% of the Orinoco Belt has been developed

E&P: Quantification of Reserves


Certification of Crude Oil Reserves by Independent Parties


0,00

22,00

50,00

70,00

100,00

120,00

140,00

240,00

Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Aug-08 Nov-08 Dec-08

RESERVES INCORPORATION TIMELINE (BBLS)

7,6

20,2020,40

25,09

49,20

56,60

90,80

108,20

120,50

146,60

191,60

235,60

9,11,5

Certification of Orinoco Magna Reserves


0

200

400

600

800

1000

1200

1400

2005 2006 2007 2008 2009 2010 2011 2012

Initial Production

New Development I

New Development II

Optimization637687

807

1,207

MBPD

1,138

Orinoco Belt Production Profile

Norway

France

SINCOR PETROZUATA

USA

HAMACA

USAUK

CERRO NEGRO

Current Production – Strategic Associations


Canadian Tar Sands vs. Venezuelan FAJA

Production Process: Surface Mining

Estimated Production Cost

US$ 25 / Barrel*+

Upgrading cost

Estimated Recoverable Reserves

170 Bbls

*Source: Wall Street Journal: As Prices Surge, Oil Giants Turn Sludge Into Gold 03.27.2006

Production Process: Oil Drilling

Estimated Production CostProduction:

< US$ 1 / Barrel

Estimated Recoverable Reserves

236 Bbls

Upgrading:US$ 4 / Barrel

Description: Through a complex state of the art mining and production process, this bituminous sand is

transformed into Heavy Petroleum

Description: 9°API Crude oil produced under available technology, that is

upgraded into 32°API Crude

ROI=10% @ $40/barrelROI=10% @ $40/barrel ROI>200% @ $40/barrelROI>200% @ $40/barrel


Refining Assets

PDVSA has a total refining capacity of 3.2 MMBPD (Dec 2005)

Chalmette (50%)92 MBPD

Paulsboro (100%)84 MBPD

Saint Croix (50%)248 MBPD

(**) Isla335 MBPD

(*) Sweeny

Lake Charles (100%)425 MBPD

Corpus Christi (100%)157 MBPD

Lyondell (41%)109 MBPD

Savannah (100%)28 MBPD

Nynäs (50%)Sweden (2 refineries)UK (2 refineries)29 MBPD

Rühr Oel (50%)Germany (4 refineries)230 MBPD

Puerto La Cruz203 MBPD

El Palito140 MBPD

San Roque5 MBPD

Refining Capacity in Venezuela 1,303 MBPD

Lemont (100%)167 MBPD

Paraguaná Refining Complex-CRP 940 MBPD

Bajo Grande15 MBPD

Refining Capacity in USA: 1,310 MBPD Refining Capacity in Europe: 259 MBPD

(# % ) are PDVSA net interest(*) 50% Equity interest in a coker and vacuum crude distillation unit(**) Under lease


Refining - International

Jamaica (50) 25

Brazil (200) 100

Uruguay (50)

Cabruta 400Santa Inés 50Caripito 50

Capacity in Venezuela MMBD

2005 1.3

2012 1.8

International Capacity MMBD

2005 2.0

2012 2.3

Cienfuegos 70

Total Investment: 16.3 US$ bnInvestment in Venezuela 14,2 (87%)Investment in Petroamerica 2,1 (13%)

Total : 3.3 4.1


More than 500,000 km² of OffshoreMore than 500,000 km² of Offshore

VENEZUELAN GULFLos Monjes

NE FALCON CARIBEAN FRONT ATLANTIC FRONT

DELTANA PLATFORM

Offshore Natural Gas

Proved Reserves: 151 Trillion Cubic Feet (TCF)Potential: 196 TCF (50% Offshore)Gas Production: 6,300 Million CF/DForecast 2010: 11,500 Million CF/D

Proved Reserves: 151 Trillion Cubic Feet (TCF)Potential: 196 TCF (50% Offshore)Gas Production: 6,300 Million CF/DForecast 2010: 11,500 Million CF/D


Delta Caribe Project - Eastern Venezuela

CARUPANOCARUPANO RRíío Caribeo Caribe

Mariscal Sucre Project 14 TCF

CIGMA

LNG

Gas / Condensate

TUCUPITA

CUM

ANA

CUM

ANA

Export: 1000 MMCF

Plataforma DeltanaProject 15 TCF

Corocoro 450 MMB3TCF

Punta Pescador

Guarapiche

Punta Pescador

Delta Centro

ORINOCO BELT

ORINOCO BELT

Great South Gas Pipeline

•B-1

•B-2

•B-3

•B-4

•B-5 En estudio


Delta Caribe West – Rafael UrdanetaProject

Assigned Blocks under Exploration Licensing

Future Exploration Licenses

3 TCF0,5 mmmbls

27 TCF7 mmmbls

Assigned Blocks


13901443

931

2006 2009 2012

177137121

2006 2009 2012

965710

469

2006 2009 2012

North America

Latin America

Europe

Asia

CRUDE OIL EXPORTS BY DESTINATION (MBD)

765290

150

2006 2009 2012

Total ExportsInternationalization

Spot SalesOrinoco Belt/New Agreements

16711041630

-

258012541206120

329713441168785

2006 2009 2012

MBD: Thousands Barrels per Day


11727650

119

46

125

20

2006 2012

12 4050

31

2006 2012

43 112121

31025

30

45

32

2006 2012

North America

Latin America

Europe

Asia

PRODUCTS EXPORTS BY DESTINATION (MBD)

Fuel OilJet

DieselGasoline

158102183160

2006 2012

233

520

234

484

43 90

5093

2006 2012

93 50

82205469388MBD: Thousands Barrels per Day


Regional Energy Integration

Name: Cien Fuegos RefineryCapacity: 70 MbpdPartners: PDVSA (100%)

Name: Abreu de Lima RefineryCapacity: 200 MbpdPartners: PETROBRAS (50%) –PDVSA (50%)

Name: La Teja RefineryCapacity: 100 MbpdPartners: ANCAP (50%) – PDVSA (50%)

Name: Great South American Gas PipelinePAÍSES: ARGENTINA, BOLIVIA, BRASIL, PARAGUAY, URUGUAY Y VENEZUELA

NOMBRE: Antonio Ricaurter Gas PipelinePAÍSES: COLOMBIA, PANAMÁ, VENEZUELA

Name: Jamaica RefineryCapacity: 50 MbpdPartners: PETROJAM (50%) –PDVSA (50%)

Energy Agreements

1. SAN JOSÉ (80,0 Mbpd)2. CARACAS (146,5 Mbpd)3. PETROCARIBE (23,7 Mbpd)


Venezuelan – Colombian Gas Pipeline

Execution up to 2006:• Jobs: 902 (Direct: 243 / Indirect: 659)• Executed: 28 %• Engineering & Environmental licenses:

Completed • Construction: Initiated July 06 installed 10 kms of

pipelines and 150 kms already manufactured

VenezuelaVenezuela

Golfo de VenezuelaGolfo de Venezuela

Fuerte Mara

CUATRO VÍASMARAUASAHU

CARRAIPIA

EL CERRO

RIO LIMÓN

SILOÉTULÉ

LOS CORTIJOS

BALLENA

MAJAYURA

EMR RL

BAJO GRANDEEMR

RU

La Concepción

El Tigre

• Completion date: May 2007• Total Investment: $ 335 Million• Total Job creation: 31,060 (4,490 direct /

26,570 indirect)

TRANSCARIBEAN GAS PIPELINE ANTONIO

RICAURTE

End Procurement Start Construction Start of the ProjectEnd Engineering


Initial Start of Operations: 2012 (50 M m3/day)

Designed Operational Capacity: 2017 (150 M m3/day)

Estimated Investment (Class V):20 Billion US$

Integration to the South


SUPPLY STRATEGY FOR THE CARIBBEAN The PETROCARIBE Initiative

Estimated Investment 2006-2012: $24 Million

• Minimize Supply Disruption Risk

• Provide Affordable Access to Energy

• Minimize Transaction Costs

• Ensure Minimum Level of Infrastructure

• Foster Economic and Social Development

• Minimize Supply Disruption Risk

• Provide Affordable Access to Energy

• Minimize Transaction Costs

• Ensure Minimum Level of Infrastructure

• Foster Economic and Social Development


Venezuela View on Venezuela View on Natural Resource Natural Resource

ManagementManagement


Venezuela Political Approach on Energy

• Restore the sovereign right of the resource owner

• Reach equilibrium with fair return to investors and sustainable development to the resource owner

• Enhance affordability, specially to those countries and communities most in need

• Reduce and eliminate asymmetries in consumption

• Promote energy integration

• Restore Discipline to Supply Management

• Foster a Dialogue Between Producers, Consumers and the Industry

• Explore Ways to Assess and Achieve Fair Price

• Enhance energy conservation and environmentalism


0%

10%

20%

30%

40%

50%

60%

70%

76 78 80 82 84 86 88 90 92 94 96 98 00

ROYALTIES

INCOME TAX

FISCAL EXPORT VALUE

DIV.

66%

45%

Public Revenues Public Revenues -- Gross Domestic Product RatioGross Domestic Product Ratio

The governance of the Venezuelan oil was unsustainable, domestically and internationally

Collapse of the Fiscal Regime


Extent of US Companies’ Ability to Enter Market

ChinaChina

KuwaitKuwait

MexicoMexico NO NO NO YES

Saudi ArabiaSaudi Arabia

VenezuelaVenezuela YES YES YES YES

Can US purchase Can US purchase local oil local oil

companies?companies?

Can a US Can a US company obtain company obtain

equity oil?equity oil?

Can US Can US company invest company invest

in Refining/ in Refining/ PetrochemicalsPetrochemicals

Can a US company Can a US company market petroleum market petroleum

products?products?

Only if Joint Venture Uncertain YES YES

NO NO YES YES

NO NO YES YES

Source: US Department of Energy; National Security Review of International Energy Requirements - February 2006


Bilateral Energy Bilateral Energy RelationRelation

Venezuela Venezuela –– U.S.U.S.


●● Venezuela accounts of Venezuela accounts of 12% to 15%12% to 15% of of total US importstotal US imports

●● Venezuela is the Venezuela is the 44thth largestlargest supplier of supplier of crude oil to the UScrude oil to the US

●● Including exports to Virgin Islands, Including exports to Virgin Islands, Venezuela was the Venezuela was the 11stst largest largest foreign foreign supplier to the USsupplier to the US

●● Venezuela is the Venezuela is the 22ndnd largest exporter of largest exporter of oil productsoil products to the USto the US

●● Venezuela is Venezuela is 4 to 5 days4 to 5 days shipping time to shipping time to the USthe US

●● Venezuela purchases more than Venezuela purchases more than $2 $2 billions per yearbillions per year of good & services from of good & services from 800 U.S. companies800 U.S. companies

●● Venezuela is one of the largest foreign Venezuela is one of the largest foreign investor in the US through its CITGO investor in the US through its CITGO refining circuitrefining circuit

Source: EIA 2006

The U.S. - Venezuela Energy Relationship

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2000 2001 2002 2003 2004 2005

Venezuela Canada Mexico Saudi Arabia

Main Oil Suppliers to the USA (Crude + Products)


2005Country Imports Exports Balance Total Trade

Mexico 169.216 101.667 -67.549 270.883

Venezuela 32.750 6.035 -26.715 38.785

Brazil 24.346 13.554 -10.792 37.900

Colombia 8.770 4.962 -3.808 13.732

Chile 6.745 4.668 -2.077 11.413

Total Trade Total Trade -- EEUU main trade partners in EEUU main trade partners in latinoamericalatinoamerica (MM US$) (MM US$)

Venezuela is the second USA Trade Partner in Latin America in 2005

Source: United States International Trade Commission


Energy Security in Energy Security in the Western the Western HemisphereHemisphere


OilNatural GasCoalNuclear EnergyHydro Electricity

MTOE

Source: BP Statistical Review 2006

317.5 MTOE317.5 MTOE10%

2,336.6 MTOE2,336.6 MTOE71%

147.2 MTOE147.2 MTOE4%

194.5 MTOE194.5 MTOE6%

69.2 MTOE69.2 MTOE2%

66.8 MTOE66.8 MTOE2%

27 MTOE27 MTOE0.8%

12.8 MTOE12.8 MTOE0.4%

8.4 MTOE8.4 MTOE0.3%

27.8 MTOE27.8 MTOE0.8%

Total Primary Energy Consumption in the Western Hemisphere


U.S. Energy Security?U.S. Energy Security?

PopulationPopulation Energy ConsumptionEnergy Consumption

U.S.

RESTOF

HEM.

U.S.

66 %66 %

33 %33 %

29 %29 %

71 %71 %

RES

T O

F TH

E H

EMIS

PHER

E

Closing the Gap


$$$$ High Oil Price $$$$

$$$$ High Oil Price $$$$

40%

60%

82% of Population

• Use of Natural Resources• Domestic Economic & Social Development• Fair Returns for Investors

$$ Fair Oil Price $$

$$ Fair Oil Price $$

Sovereign Right over Natural Resources

Determine Determine

Consumption Gap

• Increase accessibility to oil for developing countries

• Reasonable and sustainable consumption patterns by OECD countries

PressureIncrease

production by all means

Oil Exporting Countries

Pres

sure

Pres

sure

Pres

sure

Pres

sure

Pres

sure

Pres

sure

18% of Population OECD

Low Oil Price

Closing the Gap


•• The U.S. is under tremendous pressure to access secure and reliaThe U.S. is under tremendous pressure to access secure and reliable supply of ble supply of oiloil

•• The U.S. energy independence is a myth and cannot be achieved unThe U.S. energy independence is a myth and cannot be achieved under current der current consumption patterns, as the U.S. addiction to oil is highly relconsumption patterns, as the U.S. addiction to oil is highly related to qualityated to quality--ofof--life perception, and it is less likely to change that patternlife perception, and it is less likely to change that pattern

•• The U.S. SPR proved not to be sufficiently efficient in times ofThe U.S. SPR proved not to be sufficiently efficient in times of crisiscrisis

•• Alternative energy (Alternative energy (biofuelbiofuel and ethanol) is a good sign, but will not be enough and ethanol) is a good sign, but will not be enough to offset the increase in consumptionto offset the increase in consumption

•• Sources of oil in the Middle East will at the end and naturally Sources of oil in the Middle East will at the end and naturally be directed to be directed to satisfy the demand growth in Asia satisfy the demand growth in Asia –– Current geopolitics in this region proved Current geopolitics in this region proved not to be efficient to pop up more secure oilnot to be efficient to pop up more secure oil

•• The U.S. will have to rely on sustainable supply from within theThe U.S. will have to rely on sustainable supply from within the hemispherehemisphere

•• Mexico is declining, Canada is not sufficient and Venezuela has Mexico is declining, Canada is not sufficient and Venezuela has the biggest the biggest reserves of oil in the worldreserves of oil in the world

A cooperative approach between the U.S. and Latin America and specially Venezuela is indeed a sole guarantee for a sustainable

energy security in the Hemisphere

The U.S. Oil Crisis and its approach to Venezuela


•• Energy security in the hemisphere is not feasible without an eneEnergy security in the hemisphere is not feasible without an energy rgy integration that leads to development of infrastructure and sociintegration that leads to development of infrastructure and social al welfare.welfare.

•• There is an urgent need for governments to There is an urgent need for governments to reengagereengage to support to support and introduce advanced public policies towards energy integratioand introduce advanced public policies towards energy integration in n in the hemisphere. Leaving this role to the private sector doesnthe hemisphere. Leaving this role to the private sector doesn’’t work.t work.

•• Keep the sanctions out. This is harmful to U.S. businesses and tKeep the sanctions out. This is harmful to U.S. businesses and to the o the energy security in the whole hemisphere.energy security in the whole hemisphere.

•• Understand and respect political differences and manage them witUnderstand and respect political differences and manage them within hin the diplomatic arena.the diplomatic arena.

•• Enhance cooperation in area of technology and know how sharing, Enhance cooperation in area of technology and know how sharing, human talent, social development and fair trade.human talent, social development and fair trade.

Preventing a Crisis in the Energy Security

Embassy of the Bolivarian Republic of VenezuelaEmbassy of the Bolivarian

Republic of VenezuelaEmbassy of the Bolivarian Republic of Venezuela

venezuela: a key player energy equilibrium and · 2010-09-22 · pdvsa’s 2005 crude's and...

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