CAPITAL: Caracas

MONETARY UNIT: Bolivar

REFINING CAPACITY: 1,187,200 b/cd

PRODUCTION: 3.1 million b/d

OIL RESERVES: 72.6 billion bbl

GAS RESERVES: 142,500 bcf

The government was involved with Mexico and OPEC in attempting to rein in oil production during a year of ever-falling prices, but Petroleos de Venezuela predicted that the average price of Venezuelan oil would remain below $13/bbl for 3 years.

Venezuela had 43 land rigs and 19 offshore units working in October 1998, down from 68 and 38, respectively, in October 1997, Baker Hughes reported.

Pdvsa retained a production capacity target of more than 6 million b/d by 2006.

Upstream developments

Venezuela ranked among the most favorable countries for new E&P ventures in a survey by Robertson Research International.

Here is a rundown of E&P highlights by geographic area:

- Maracaibo. Pennzoil Venezuela was to begin operating the B2X-68/79 and B2X-70/80 blocks, acquired in the third marginal-fields bidding round in 1997, in mid-1998.

Pdvsa transferred operations of Venezuela`s LL-652 oil field to a consortium led by Chevron Overseas Petroleum Inc.

Union Texas Petroleum, acquired by ARCO during the year, purchased Occidental Petroleum`s Venezuelan unit for $204.5 million. With the purchase Union Texas became operator of the 1 million acre Desarrollo Zulia Occidental (DZO) block west of the lake.

The lake has more than 7,000 wells in as much as 130 ft of water, most producing on gas lift.

- Orinoco. Conoco and Pdvsa produced the first oil in August 1998 from the $2.4 billion, 55,000 acre Petrozuata extra-heavy oil project. The Petrozuata joint venture drilled 31 horizontal wells on the tract, and 45 more were in various stages of development. The 35 year project was expected to involve about 530 horizontal wells ultimately.

Mobil, Veba Oel, and Pdvsa hoped to start production in 1999 at an initial 60,000 b/d from Orinoco`s Cerro Negro area. The 8.5° gravity crude was to be upgraded at Jose to 16.5° gravity.

- Eastern Venezuela. Basins in eastern Venezuela saw high levels of production, development, and redevelopment and limited exploration in 1998.

Perez Companc, Union Pacific Resources, and Corod de Venezuela made a discovery on the Oritupano-Leona concession south of Maturin. The ORI-166E well was producing 2,200 b/d of oil. Preliminary proved reserves for the new field were 13 million bbl of oil with a further 22 million bbl possible. The block was producing 45,000 b/d in mid-1998, up from 9,000 b/d in March 1994.

Lasmo plc planned to hike production to 120,000 b/d by year-end 2002 from 11,000 b/d in mid-1998 with redevelopment of the 430 sq km Dacion license area southeast of Anaco. Dacion block in the Oficinia trend contained four fields: Dacion, Leguas, Levas, and Ganso.

A Benton Oil & Gas joint venture was working the South Monagas Unit west of Tucupita. The unit contains Uracoa, Bombal, and Tucupita oil fields.

Processing activity

Much of the Venezuela`s processing action in 1998 involved establishment of a major heavy crude upgrading and petrochemical center at Jose near the Caribbean coast southwest of Puerto La Cruz.

Units of Pdvsa and cooperating companies let design or construction contracts during the year for a 422 ton/day hydrogen plant, coker and gas recovery unit, and 1 million metric ton/year ethylene unit at Jose. Completion was set for 2001.

Transportation

Conoco and Pdvsa`s Petrozuata joint venture began shipping extra heavy oil from the Orinoco belt Zuata area through a 120 mile pipeline north to the Jose industrial complex on Venezuela`s northern coast. This was the first private pipeline to have been built in Venezuela in more than 20 years. Filling the line took 20-30 days.

A 36 in. pipeline was transporting a mixture of extra-heavy, 9° gravity crude oil and diluent from Zuata field to Jose, while a 20 in. pipeline returned the diluent to the main station in the field for reuse.