State oil company Petróleos de Venezuela SA plans to boost investments in the country’s natural gas sector over the next five years in order to almost double natural gas production.
PDVSA, as the Caracas-based company is known, plans capital investments of $38.4 billion during 2015-2019 to increase natural gas production from 8.7 billion cubic feet per day in 2015 to 10.5 billion cubic feet per day by 2019, said PDVSA Offshore Executive Director Douglas Sosa in late June during the fifth Hydrocarbon Congress in Maracaibo. Under this investment plan, PDVSA expects to increase offshore gas production to 1.6 billion cubic feet per day by 2019 from nil in 2014, according to Sosa, which would represent 16 percent of the country’s total gas production.
Increased natural gas production will help PDVSA meet increasing demand in the domestic market from the industrial and petrochemical sectors and reduce its dependence on costly refined product imports to generate electricity. Excess natural gas production could be destined for various export markets.
“In two years, under the plans we are promoting onshore and offshore, we could easily cover the national gas deficit and then convert Venezuela into a potential exporter,” said Sosa. “This is our vision, but before we can export gas, we need to fulfill the national deficit.
We are talking about exports to Trinidad and Tobago, Central America, South America and, if we consider the LNG projects that we are promoting, we could export this gas to further destinations.”
Caracas Capital Markets Managing Partner Russ Dallen said in a phone call from Miami, “Given the repeated failure by PDVSA to boost crude oil or natural gas production over the last decade and a half, any kind of projection that they are going to do something that hasn’t been done in 15 years is always overly optimistic on their part.”
Venezuela, the South American country with 196.8 trillion cubic feet of proved natural gas reserves, the largest in Latin America and the Caribbean, is planning to develop its massive natural gas reserves offshore as it looks to increase the participation of natural gas in its energy matrix from 26 percent currently to 51 percent by 2031, said the country’s natural gas vice minister, José Gregorio Prieto, during his participation on May 21 in the Venezuelan Gas Processor Association (AVPG) conference in Caracas.
Venezuela’s natural gas ministry is looking to develop prospects offshore for the eventual exportation of gas, a move to increase the country’s dollar receipts, said Prieto.
Of Venezuela’s total proved natural gas reserves: 165.93 trillion cubic feet are onshore, while 31.7 trillion cubic feet are located offshore.
The country has additional probable reserves of 30.5 trillion cubic feet and possible reserves of 29.6 trillion cubic feet, according to PDVSA. Venezuela expects to prove up an additional 147 trillion cubic feet of natural gas reserves offshore and 53 trillion cubic feet onshore.
About 90 percent of Venezuela’s gas reserves are associated with crude oil. Of this, the bulk is contained in gas caps above the country’s major oil fields.
About 70 percent of the associated natural gas that is produced is used to maximise oil production through re-injections, gas lift, for in-field power generation and crude upgrading.
Despite this abundance of resources, Venezuela continues to suffer a natural gas deficit in its industrial western region.
The arrival of Venezuela’s first natural gas production this summer from the Cardon IV block offshore Falcon state will allow PDVSA to reduce consumption of costly imported diesel that’s used to generate electricity.
For many years, PDVSA has relied on natural gas imports from Colombia to help it cover demand in Zulia state. However, the company announced on June 11, 2015, that its contract to import gas from Colombia would not be renewed when it expired on June 30, 2015.
With the arrival of 150 million cubic feet per day in July from the Cardon IV block, increasing to 450 million cubic feet per day by year-end 2015, PDVSA expects it will be able to export gas to Colombia in early 2016.
“PDVSA plans to initially export 40 million cubic feet per day of natural gas to Colombia in January of 2016,” said PDVSA Gas President Anton Castillo in late June during the fifth Hydrocarbon Congress in Maracaibo, Venezuela.
Despite the plans, upgrades and other completion work along a key pipeline route to allow PDVSA to ship Cardon IV block natural gas to Ule and then on to Maracaibo in Zulia state are still unfinished and could delay this export target, said Gas Energy Latin America Director Antero Alvarado in an interview from Caracas.
“Besides exporting gas to Colombia via natural gas pipelines, excess Venezuelan natural gas could potentially be exported in the form of compressed natural gas or CNG, or in the form of liquefied natural gas or LNG,” said Cardon IV Planning and Commercialisation Manager Jorge Estebanez Lazaro during the AVPG conference. All of these options are considered technically feasible, the executive said.
“The export of Venezuelan gas will not only allow the country to gain another dollar source, but will also allow the country to optimise its consumption of natural gas,” said Lazaro.
A natural gas pipeline could allow Venezuela to export gas to Aruba and Curacao, while CNG could be used to export gas to Central America and the Caribbean, including Panama, the Dominican Republic, Jamaica, Cuba and Puerto Rico, he added.
Regional dynamics are shifting, and the increase in U.S. shale gas production has significantly impacted regional market dynamics.
Given a Henry Hub price of around $4/MMbtu for 2014-2015, increased production in the United States and future exports in 2018 will have an impact on gas markets in Latin America, according to IPD Latin America; thus, the United States will no longer be a viable market destination for gas supply from Latin America.