OGJ Oil Diplomacy Editor
LOS ANGELES, May 26 -- Venezuela’s President Hugo Chavez said his country will increase its oil production by 300,000 b/d toward yearend, but did not detail which fields the additional supplies would come from.
Chavez also suggested that Venezuela could increase its output despite its quota agreements with the Organization of Petroleum Exporting Countries because other members are producing under their quotas.
“Yes, OPEC has quotas,” Chavez acknowledged. “But there are OPEC countries that aren't able to fulfill their quotas because their production (capacity) went down.”
Again, the Venezuelan president did not offer details of which OPEC members are producing less than their quotas and by what amounts. Nor did he detail how his country would be authorized over other members to make up the difference.
Chavez’s remarks put him at odds with statements by other OPEC members, Libya in particular. Last week, Shokri Ghanem, the chairman of Libya's National Oil Corp., explained the recent drop in world oil prices as due in part to the failure of OPEC members to adhere to their quotas.
“The oil market is in a state of fluctuation,” said Ghanem, who cited the strengthening of the dollar, demand for oil in the second quarter, speculation on other commodities, and a lack of full compliance by OPEC members with quotas. “I urge OPEC members to respect quotas,” Ghanem said.
Chavez also said Venezuela’s next large increase in production would take place in 2014, presumably when several new drilling projects in the heavy-crude Orinoco region are expected to come online.
According to analyst IHS Global Insight, “Venezuela is set to see its first significant production rise…with new production coming from a series of large oil projects in the Orinoco belt awarded either through a public tender of bilateral negotiation.”
Interest in the Orinoco belt has been picking up, but some countries and international oil companies remain wary of Chavez’s penchant for nationalizing foreign companies.
This week, Nippon Export & Investment Insurance (Nexi) decided to insure Inpex, Mitsubishi, and Japan Oil, Gas & Metals National Corp. (Jogmec) for their combined 2.55% stake in the Carabobo-3 (C3) project in the Orinoco heavy oil belt.
According to one industry analyst, “Nexi’s decision provides evidence that companies have recognized the threat of state intervention but have also decided that the benefits of accessing the country's resource wealth outweigh the risks.”
A consortium of Mitsubishi Corp., Inpex Corp., Chevron Corp., and Venezuela’s Suelopetrol was awarded a contract in January by the Venezuelan government to develop and produce crude oil in the C2 South, C3 North, and C5 blocks in the northeast Orinoco River.
The consortium is now studying feasibility with a plan to form a joint venture with Venezuela's state-owned Petroleos de Venezuela SA to produce as much as 400,000 b/d of oil at the project.
It is expected the consortium will hold a combined 40% interest in the joint company, while PDVSA will hold the remaining 60%.
Contact Eric Watkins at firstname.lastname@example.org.
Chavez: Venezuelan oil production set for significant rise