To The Editor, Petroleumworld

I refer to the article you published by Gary Marx of the Chicago Tribune, “Venezuela puts a squeeze on foreign oil companies.”

Mr Marx has misled his readers when he says, “But extracting heavy oil, which in the Orinoco has the consistency of chewing gum, is difficult, requiring cutting edge technology and huge investments.”

In fact, the oil in the subsurface is quite liquid since it has a temperature of 50º C. It is only when the oil is pumped to the surface and cools down that it turns viscous. It then becomes more like a thick tar and, if seen coming out of a production pipe, it forms into blobs which elongate and then drop. But that is hardly like chewing gum which just adheres to some surface.

Roughly two thirds of the substance in the Orinoco Belt is a liquid called extra-heavy oil, and the other third is bitumen which has a boot polish, rather than a chewing gum, consistency.

Also “extracting” or producing the oil is not particularly difficult. The technology of drilling wells in a cluster has been around some time as has horizontal drilling. Proof of this is that the drilling cost per barrel is not much higher than for those wells drilled in traditional areas.

Mr Marx is correct in noting huge investment is required, but that is mainly in constructing the upgrading facilities for turning the viscous oil of some 8º to 9º API into one of more that 16º API. It is remarkable that Sincor upgrades the oil into one of 32º API. These plants certainly incorporate the most modern technology and improvements are being constantly made so that the processing cost per barrel is likely to go down in the future.

I estimate current production and upgrading costs are about $12 a barrel. This figure could go up to about $14 a barrel if steam injection or other enhanced recovery method is made mandatory in order to increase the oil recovery factor. That leaves a huge margin with the present price of $60 a barrel and will still provide a large margin should the price fall to $40 a barrel. The conventional wisdom is that prices will not fall below that level in the foreseeable future.

There is no lack of interest by foreign companies to invest in the Orinoco Belt despite the tougher financial conditions the government intends to put in place. While the government’s preference for other State companies is understandable, surely it would make sense to invite some multinationals to invest in the Orinoco Belt since they can provide both the necessary funds and the latest technology.

Oliver L Campbell

05.07.06