[sparky]

.
The Orinoco belt is the largest accumulation of fossil hydrocarbon ,by far
the stuff is basically thick tar , so far there has been plenty of interest but no hard development
the local politics are treacherous in the extreme ,
Calling late president Chavez "mercurial " would be an understatement

a consortium of sort was cobbled together , Venezuela had the control ,
big Indian interest and some real oilmen from Russia and Malaysia
a pilot plant has been set up with 30.000 barrels day , hopefully brought to 800.000 in a few years

Well things are not rosy !
http://en.mercopress.com/2013/10/03/rus ... -venezuela
.

[Ron Patterson]

And things just keep getting worse for Venezuela.

OPEC December Crude Output Falls to 2-Year Low: Survey

http://www.businessweek.com/news/2013-12-31/opec-december-crude-production-falls-to-two-year-low-in-survey

Venezuelan Policies
Venezuelan production dropped 235,000 barrels a day to 2.45 million this month, the survey showed. The South American country pumped the least crude since October 2011. Resources have been diverted from energy sector into social welfare programs, sending production lower.

Petroleos de Venezuela SA, the state oil company, was purged after a two-month oil strike intended to oust President Hugo Chavez from power in 2003. Nicolas Maduro, who became president in March when Chavez died, has continued his predecessor’s policies.

“It’s hard to see how the situation in Venezuela gets any better,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “Funds have been used to prop up the government instead of maintaining the oil industry since the PDVSA strike in 2003. It’s clear the country is on an unsustainable path.”

[Pops]

Resources have been diverted from energy sector into social welfare programs, sending production lower.

[/quote]
I've come to the conclusion that as the cost of E&P rises, this will happen across the board, including the IOCs whose shareholders are going to see higher and higher pump prices and lower and lower returns on their investment.

[Subjectivist]

Resources have been diverted from energy sector into social welfare programs, sending production lower.

I've come to the conclusion that as the cost of E&P rises, this will happen across the board, including the IOCs whose shareholders are going to see higher and higher pump prices and lower and lower returns on their investment.

That sounds like a self fulfilling prophecy, the costs go up, investments go down, production goes down, prices go up, costs go up. Wash rinse repeat. Peak becomes a matter of where cash resources are focused instead of how much is needed to keep production as high as possible so instead of a moderate down slope the drop turns into a cliff.

[Subjectivist]

Why not make into that slurry stuff...Orimulsion? Then you can burn it in a combined cycle gas turbine electric power station and have way less pollution than you get burning coal. Somewhere I think on po.com, I read they even developed a mix that would burn in ship diesel engines and maybe even in locomotive engines. Sure it isn't a cure all, but that doesn't mean it isn't a cure partial step. I think on the down slope we will need every option anyone can think of.

[sparky]

.
@ subjectivist........ "and have way less pollution than you get burning coal" , pretty much the same or even worst

@ pstarr ,Bunker oil is really really thick , we had a steam jacket just to keep it flowing
but it's not quite the lowest fraction , lower still is asphalt for road use

the crappiest fraction is "slop" , basically what is ending up in the effluent collection ponds

[ROCKMAN]

Here are all the juicy details you would ever want to know about Orimulsion. Unfortunately in Spanish. But the English commentary hints at it being not terribly impressive. From: http://settysoutham.wordpress.com/2012/ ... he-debate/

"One person who has studied this topic more than just about anyone is Juan Carlos Boué. Boué worked for years as an outside consultant to the Chávez administration’s oil ministry in its various names. He writes: While you were in Venezuela, you must have heard about a business called Orimulsion, which everybody there claimed was the biggest thing since sliced bread. I wrote an immensely detailed forensic report about it, which was published through Le Monde Diplomatique Venezuela, but has had an extremely restricted distribution… If you are daunted by the size and specialised nature of the text, you can skip straight to the appendix, where details on prices and other commercial conditions (previously confidential) are given regarding all the Orimulsion contracts that were signed throughout this product’s mercifully brief life. Surprisingly, the Venezuelan political opposition is talking about resuscitating this Venezuelan invention, which brings to mind that saying about the post-Revolutionary Bourbon kings in France having forgotten nothing and learned nothing.

Note: "...this product’s mercifully brief life."

But here's a more readable analysis from: http://caracaschronicles.com/2012/08/08 ... n-edition/

The Capriles Campaign’s decision to bring back Orimulsion from the dustbin of failed innovation history has introduced something the campaign had almost completely lacked until now - an actual policy debate between the government and the opposition. Orimulsion was a late-80s, early-90s made-in-Venezuela solution to the problem of what to do with the zillions of barrels of tar (because let’s be clear, “extra-heavy crude” is a euphemism for tar) under the Orinoco watershed. Some eggheads at Intevep figured you could emulsify it by whisking water into it (just like a vinaigrette), and you could then burn the emulsion at minimally-reengineered coal-fired power plants. (Obviously, that also means Orimulsion sells for about the price of coal.)

At a time when there was no practical way to refine Orinoco tar into higher value products, Orimulsion made good sense, and PDVSA had moderate success marketing the stuff abroad. But the advent of tar upgraders in the 1990s largely pulled the rug from under the Orimulsion market. Once we had the technology to turn orinoco tar into conventionally refineable “synthetic crude”, there seemed little reason to keep treating it like coal. And so the new PDVSA ended up ditching Orimulsion, (and, incidentally, defaulting on a bunch of long-term supply commitments in the process.) The problem, of course, is that the high-tech upgraders you need to pre-refine tar into syncrude are complex and very, very expensive, and the Chávez government has completely failed to bring new ones into line. This has become a major bottleneck in efforts to develop the Orinoco Tar Belt, as absent new upgraders you’re stuck having to dillute low-value tar with high-value crude to make mixtures able to be processed. But the higher-value oils are scarce in Eastern Venezuela, and their production has also become a bottleneck.

Capriles is now floating a carefully hedged appeal to consider re-launching Orimulsion production. In the current context – with no new upgraders, and too little dilutant crude - relaunching Orimulsion might just make some sense, as a short-term fix to the problem of raising quick cash to finance upgrader construction. But we shouldn’t fool ourselves with feel-good invented-in-Venezuela stories: Orimulsion was a miserable compromise, a grubby waste of national resources born of a lack of better technological options. Returning to it is something you’d only consider out of sheer desperation: with oil prices in the triple-digits, selling oil for coal-prices is the equivalent of burning heirloom furniture for heat. And so, on the one actual policy debate of the campaign so far, I find myself in the uncomfortable position of siding largely with the government!

Though, of course, in the larger scheme of things if PDVSA had managed to bring even a single upgrader online in the last 14 years, we wouldn’t be having this sad, 80s-style debate in the first place. That people are seriously thinking of returning to Orimulsion is depressing, but that we lack better options is even worse.

[Tanada]

Interesting ROCKMAN, sounds to me like Orimulsion is a low tech solution to a resource sale problem for Venezuela. They need to ask themselves a simple question, is making some money selling Orimulsion better than making no money selling raw tar? Someone said Chavez was mercurial, I think that pretty well covers it. If Venezuela had kept its commitments to produce and sell Orimulsion for the last 15 years or so they could have used that money to fund upgrading facilities as they went along and transitioned into upgrading the tar into internationally value added oil. Instead they backed out of several contracts and were left with nothing to show for it at all except millions of barrels of tar that they would have otherwise been able to sell for some income they desperately needed and still need.

How different is this Venezuela tar from Canadian Athabaska tar? Do the same kind of upgraders work or is it a unique technological challenge? How long until China does a JV to build an upgrader in Venezuela and take every drop of syncrude it can process?

[Ron Patterson]

Great post Rockman, thanks a million for the info. The more we learn about the Orinoco Bitumen the less promising it sounds.

Back when they sold Orimulsion they had to convert the bitumen to Orimulsion, 30% water 70% tar, in the field to get the viscosity low enough to transport by pipeline. Even after it was converted to Orimulsion it still required heavy duty screw pumps to push it through the pipeline. http://www.warrenpumps.com/resources/orinocobitumen.pdf

Now they mix it with some other petroleum product to get the viscosity low enough to transport it by pipeline.
http://pubs.usgs.gov/fs/fs070-03/fs070-03.html

Extra-heavy oil commonly requires the addition of diluents (gas condensate, natural gas liquids, or light crude) to enable the oil to be transported by pipeline. Extra-heavy oil must also be chemically upgraded to reduce density and remove contaminants before it can be used as refinery feedstock. In recent projects in the Venezuelan Orinoco heavy oil belt, 1 barrel of diluents is required for every 3 or 4 barrels of extra-heavy oil produced.

I cannot find the link now but I read an article a couple of years ago where they were mixing naphtha with the bitumen in order to get it light enough to transport via pipeline. But they were having serious problems finding the naphtha.

[kublikhan]

Venezuela seems to me more than simply a case of judging further oil investments not worthwhile and using the money for other social projects. PDVSA has numerous problems that are hampering it. Oil revenues that should be getting used for maintenance and investment instead gets diverted from PDVSA to slush funds like Fonden. CapEx is suffering as a result. We are seeing a case of killing the golden goose. The neglected maintenance also leaves the company with an accident rate several times higher than the world average.

Then there is the confiscation of foreign assets. Companies don't want to operation under such an environment. Yet PDVSA still wishes to get in bed with foreign companies with PDVSA having 60% ownership with foreigners footing 100% of the startup capital. No wonder foreign companies are bailing from Venezuela.

I was reading an old article on the Orinoco from 2011(The Red Apertura) and was curious how things were going in the Orinoco today. Sounds like it's still not going well.

[Quinny]

About 20 years ago In Lancashire we had a planning application for a Cement factory that intended to use Orimulsion in the manufacturing process. We investigated it thoroughly and turned down the application. There were major worries about the problems with the plume. The company had put forward a plan including what were at the time the most highly advanced flue scrubbing technologies available. The toxicity levels were scary.

[ROCKMAN]

"Now they mix it with some other petroleum product to get the viscosity low enough to transport it by pipeline." Speaking of which: once before I mentioned an amazing fact IMHO - they were plans to build a pipeline from Houston to a Alberta to haul condensate from Texas to Canada to help pipeline the oil sands production. And recently I read a report of a company that developed a method to separate the light oil from the heavy production and recycle it. A shortage of light oil is more of a hindrance to oil sand development than a pipeline problem. Some folks have a difficult time seeing the entire dynamic of oil sands development. They also fail to understand how $TRILLIONS in potential revenue can be a very powerful motivation to love problems.hn

Just a guess but given the size of the Orinoco reserves and the current price of oil building those very expensive upgrades might make sense...on paper. But given the volatility of Vz politics and the difficulty of predicting oil prices long term I can understand why no one is rushing in...even China. The previous post highlights the risk: what if they had made that huge caped investment in the cmt op based upon Orimulsion just to see Vz not honor the contract. Nationalization always feels good...at first. Not so much when folks won't risk investing again.

[sparky]

.

the bitumen of Canada and Vz are closer to coal than crude oil ( Rockman will jump at this )
there is a technique of using coal as a water slurry

there also is a vague parallel between Coal to liquid and synthetic crude oil
beside the headache of cleaning up the feedstock ,
Hydrogen must be added to make those beautiful short molecules
natural gas can be used or water cracked , in both case it's costly
sometime , if a chlorine plant is close by , Hydrogen as waste product is available

The technical stuff is not insurmountable but the politics are scary