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Naphtha cut eroding Venezuela's heavy crude flow


By Argus

Petroleumworld 02 11 2019

A naphtha shortage exacerbated by new US oil sanctions is starting to erode Venezuela's crude production from the Orinoco heavy oil belt, which is the source of most of the Opec country's output.

According to internal production data from Venezuela's state-owned PdV, Orinoco daily output fell by more than 72,000 b/d to 782,200 b/d on 7 February, notably because of a shortage of diluent but also because of high water and sediment content and equipment problems.

PdV and its joint ventures had been sourcing all of their diluent in the form of naphtha from the US market before sanctions abruptly cut off supply at the end of January. PdV is now casting a wide net to nail down alternative supply sources.

Even before the sanctions were imposed on 28 January, PdV had been struggling to ensure stable supply of naphtha and other refined products such as gasoline because of a lack of cash flow and US financial sanctions that were imposed in August 2017. PdV's Venezuelan refineries that used to supply the products are either shut down or operating at very low capacity levels.

Orinoco crude, which has a quality of 8°-10°API, is normally blended with 30pc naphtha to produce diluted crude oil (DCO). The DCO is transported to Jose where it is either upgraded into lighter synthetic crude such as 32°API Zuata, blended with light Mesa grade to produce 16°API Merey, or exported directly into the international market.

Although the PdV operational data obtained by Argus only covers one day, it provides a window into how the naphtha shortage is compounding a host of other technical challenges in the Orinoco oil division. Earlier PdV reports seen by Argus confirm the frequency of the day-to-day operational challenges.

The 7 February data indicates that PetroMonagas, a joint venture of PdV and Russian state-controlled Rosneft in the Carabobo sector of the oil belt, posted a one-day loss of 27,800 b/d of production, partly because of "wells affected by low quality of diluent" in addition to pump problems and a high water cut. PdV and its partners sometimes mix naphtha with light crude to make diluent that is not as effective as naphtha on its own.

The PetroMonagas loss accounted for nearly all of the 31,280 b/d decline in overall production of 378,230 b/d of in the oil belt's Carabobo sector.

Junin Sur, which is operated solely by PdV, lost 10,000 b/d yesterday because of the lack of diluent. Junin Sur is located in the oil belt's smaller Junin sector, where overall output fell by 38,090 b/d to 136,740 b/d yesterday.

The least affected sector of the oil belt was Ayacucho, where production dipped by 2,740 b/d to 252,480 b/d. The main Ayacucho project is PdV-led PetroPiar with 30pc partner Chevron, which added 2,800 b/d in the 7 February daily report. Diluent injection in well clusters and main lines was adjusted and the activation of chemical injection to improve flow was activated, the report noted, shedding light on another alternative to naphtha.

Other problems detailed in the report include breakdowns in air pumps and gas lift systems, and unstable multiphase oil and gas flow.

A senior PdV official consulted by Argus described the operational state of the industry as a "disaster" and predicted sharper declines by the end of February and knock-on effects on exports .

Venezuela's production from its mature eastern and western divisions, the source of light and medium grades, has been falling off sharply as well, with the western division alone last seen in January at just 122,000 b/d, around half of its mid-2018 level.

Venezuela is in the throes of a tense political standoff between sitting president Nicolas Maduro and the speaker of the legislature Juan Guaidó, whom most Western countries recognize as acting president.



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