July 7, 2006
Venezuela deals new hand on gas
By Gareth Chetwynd
Published by Upstream Online

"Venezuela is piecing together the parts of an ambitious project to develop offshore gas reserves to meet domestic demand and export LNG from a new liquefaction plant.

Petróleos de Venezuela (PDVSA) is moving beyond conceptual planning and into basic engineering work for two offshore production complexes, with Brazil's Petrobras and US supermajor Chevron lined up as probable partners. Negotiations between PDVSA and Petrobras over the Mariscal Sucre project are approaching the critical point, although it is still not clear whether any gas from four fields demarcated in the northern sector of the Gulf of Paria will be earmarked for an LNG project.

In the Plataforma Deltana region, a shallow-water area in the eastern Gulf of Paria , PDVSA and Chevron have carried out studies into an LNG project intended to enter into production in 2010. The US company has been invited to take a minority equity stake in the downstream part of the scheme.

In the case of Mariscal Sucre, recent statements by PDVSA officials suggest that Petrobras' chances of participating in an LNG project may be receding, although the project launch is set for the year-end.

Eulogio Del Pino, director of the corporate arm of state-run PDVSA, said that Petrobras is being offered a stake of just 30% in the Mariscal Sucre project, down from earlier expectations of a 50-50 split.

Petrobras was invited to join at Mariscal Sucre last year after PDVSA ended a long-running preliminary agreement with Shell aimed at building a $2.7 billion LNG plant. The project has stalled again as PDVSA has thrown increased emphasis on meeting domestic gas demand.

Venezuelan officials say Mariscal Sucre is on course to start producing gas at the end of 2008, but at least half the expected capacity will be dedicated, as a matter of priority, to meeting domestic needs.

'We will begin with 600 million cubic feet per day coming mainly from the Dragon field and we will continue developing the areas and expect to achieve a plateau of 1.2 Bcfd,' said PDVSA offshore manager Carlos Figueredo. Reserves on the four Mariscal Sucre fields are put at between 11 trillion and 13 Tcf.

PDVSA and Petrobras are working toward a deal on Mariscal Sucre before a 2 August deadline, but the Venezuelans have said they will go ahead 'with or without' their Brazilian partners.

To underline this point, PDVSA is now tendering for two semi-submersible rigs to work on the Mariscal Sucre development and is engaged in procurement work for a 110-kilometre gas pipeline connecting the Dragon field to Guiria on Venezuela's Paria peninsula.

'Engineering and design work for subsea equipment and subsea installation is in progress and we expect to drill the first eight subsea wells for the Dragon field in 2007,' Figueredo said.

PDVSA is also making approaches to service companies with experience of subsea completion and other aspects of offshore production, possibly in preparation for carrying out the project without a partner such as Petrobras.

This initiative will include incentives for service companies to set up offshore support bases in Venezuela , and an area has been set aside for this purpose on the hydrocarbons and petrochemicals complex (CIGMA) that PDVSA intends to build on the southern side of the Paria peninsula.

Petrobras has maintained a relatively cautious stance on the issue of Mariscal Sucre, merely signalling that the absence of an export aspect to the business could tip the balance away from a deal.

'We are still studying the business model, including the form of our participation,' said Gerson Fernandes, general manager of Petrobras' Venezuelan unit. 'Dedicating (more) of the gas to a domestic market with regulated prices alters the economic model and that has caused the negotiations to take longer.

'By August we will take the appropriate decisions based on all these factors and see if the economics work to make it attractive to participate,' he added.

PDVSA's plans for Mariscal Sucre include a maintenance platform and a main processing facility on the Dragon field. 'We are getting ready to move beyond pre-FEED for these facilities, and this will lead to an open bidding process,' said Figueredo, adding that the functions of the processing facility will include de-hydrating the gas offshore".

On the Plataforma Deltana, PDVSA has been working closely with Chevron following that company's success in discovering an estimated 7 Tcf of reserves on the Loran field on Venezuela's Block 2. Chevron has discovered more reserves on the Manatee field, located over the maritime border on Trinidad & Tobago, and the two governments are attempting to negotiate a unitisation agreement.

ConocoPhillips is also involved in the negotiations with PDVSA, both as a partner of Chevron on Block 2 and as operator of the Corocoro project in the western Gulf of Paria, offering an additional 1 Tcf of gas reserves.

PDVSA's pre-FEED studies for the Plataforma Deltana have focused around Loran and point to a central processing facility, conventional wellhead platforms and jackets, with some compression units and a 300-kilometre pipeline.

Chevron has done its own basic engineering work for an LNG project and is understood to be working towards a formal declaration of commerciality.

PDVSA is performing engineering work on other aspects such as the pipeline but it is not yet clear how responsibilities will be shared.

'Plataforma Deltana has such high potential that we are aiming to install a pipeline of at least 42 inches with the capacity to gather and transport gas from a wider area than just Loran,' Figueredo said.

The PDVSA manager said the capacity of the central processing facility is still under analysis and depended on the production system selected, but said it would be a large unit weighing between 40,000 and 60,000 tonnes.

'We are working very closely with Chevron and ConocoPhillips on this development because we have common and complementary interests,' Figueredo said.

PDVSA is also expected to push for an aggressive local content quota, although Figueredo's comment on the matter was pragmatic.

'Venezuelan companies are aligned with us to increase domestic content in the offshore sector. We see 35% as attainable and we believe we can increase this to 65% in six or seven years,' he said.

PDVSA is also starting engineering studies for a pipeline from the Corocoro field. 'We are looking at ways of speeding up the incorporation of non-associated gas from Corocoro, although the project is not yet in place,' Figueredo said.

For the liquefaction plant itself, PDVSA is understood to have selected the Air Products patent for proprietary process technology and cryogenic heat exchanger, but Figueredo would go not confirm this.

The Venezuelan Ministry of Mines and Energy has said the first LNG train will be build under Venezuelan leadership, using a tolling fee system.

Figueredo stressed that minority equity partners would be welcome. 'We are working very closely with Chevron and ConocoPhillips and we are hoping to go forward with them.'