Venezuela Oil and Gas Report Q4 2011
Business Monitor International, October 2011, Pages: 99
Business Monitor International's Venezuela Oil & Gas Report provides industry professionals and strategists, corporate analysts, government departments and regulatory bodies with independent forecasts and competitive intelligence on Venezuela's Oil & Gas industry.
This latest Venezuela Oil & Gas Report from BMI concludes that high oil prices will sustain investment in the country’s Orinoco Belt heavy oil projects, setting the stage for a decade of strong production growth despite a difficult operating environment.
BMI forecasts that after years of declining output, new heavy oil volumes in the OPEC country will see production rise from 2.34mn barrels per day (b/d) in 2010 to 3.1mn b/d in 2015. Over the same period, consumption is expected to rise modestly, from 746,000b/d to 784,000b/d, implying net production available for export will rise from 1.6mn b/d to 2.3mn b/d.
Closer political ties and a series of major oilfor- loans deals mean that an increasing amount of these exports will be diverted away from the US, which has traditionally been Venezuela’s primary export market, to China.
A high degree of uncertainty surrounds Venezuela’s gas sector. The government has set out ambitious export plans and exploration success has shown an ample resource base. Nevertheless, regulatory uncertainty and an apparent reluctance on the part of investors to commit to gas projects raises doubts over whether or not the government’s targets can be achieved.
BMI forecasts strong growth in the sector, with gas production rising from 22.9bcm in 2010 to 33bcm in 2015. Gas consumption, however, is also expected to rise rapidly, from 25.08bcm in 2010 to 30.96ncm.
The supply and demand trends imply that 2015 will be the first year in which the country has surplus volumes available for export, though even then it will only be a modest 2.04bcm. Regional variations in supply and demand may mean that the country exports LNG from gas projects off the east coast while continuing imports from Colombia into the west of the country.
Over the long term, we forecast that the country will continue to ramp up oil production for the Orinoco Belt and could become a major gas exporter. We forecast oil production rising rapidly over the second half of the decade, with output reaching a plateau of 4mn b/d between 2018 and 2020. Consumption is expected to hit 824,000b/d by 2020, implying net exports of over 3.1mn b/d at the end of the decade.
While we are sceptical that Venezuela will meet it short-term gas export goals, a strong resource base and rising investment should see export volumes rise sharply towards the end of the decade. Gas production is expected to nearly double between 2010 and 2020, when it is forecast to reach 44bcm. Demand growth is expected to lag production over the second half of the decade, with significant volumes available for export from 2019.
If development is accelerated at major gas finds in the east of the country and at the major Perla gas find, this timeline could be accelerated, though these projects have already seen delays and without a clear monetisation strategy in place we see further delays over the coming years.
Global GDP growth in 2011 is forecast at 3.2%, down from 4.3% in 2010. Growth in the eurozone should be marginally higher than 2010, while US and Chinese economic expansion will slow and Japan’s growth will be negative, reflecting the devastating earthquake and tsunami in March 2011.
BMI's oil price assumption for 2011 is US$101.90/bbl for the OPEC basket, falling to US$97.50/bbl in 2012; US$106/bbl for Brent in 2011 falling to US$97.62/bbl in 2012; and US$95.30/bbl in 2011 rising to US$97.39/bbl in 2012. Prices at these levels should be sufficient to support Venezuela’s investmentintensive heavy oil projects in spite of a difficult operating environment and unfavourable fiscal regime.
State-owned Petróleos de Venezuela (PdVSA) works in cooperation with numerous international oil company (IOC) partners in conventional and heavy oil projects.
Although recent renationalisation moves, changes in taxation and alterations to the licensing system have reduced foreign involvement, several key players appear committed to the country’s heavy oil schemes and fellow national oil companies (NOCs) from China, Russia and other countries will play an increasingly important role in Venezuela’s oil and gas sector.
In spite of a strong production growth outlook and the region’s largest resource base, the challenges outlined above mean that Venezuela performs relatively poorly in BMI’s composite Business Environment Ratings (BERs), which combines upstream and downstream scores. With a score of 44.4, Venezuela sits in sixth position, just ahead of Mexico. This reflects the country’s fifth place in BMI's updated upstream ratings, behind T&T, and ninth place position in BMI'sdownstream ratings.
In the upstream sector, strong resource potential and production growth is offset by strong state control of the sector, the threat of nationalisation, and a fiscal regime that in some areas verges on punitive, such as, for instance, the institution of a 95% windfall tax on revenue from oil prices higher than US$100/bbl.
Executive Summary
SWOT Analysis
Venezuela Political SWOT
Venezuela Economic SWOT
Venezuela Business Environment SWOT Analysis
Venezuela Energy Market Overview
Oil Supply And Demand
Table: Latin America Oil Consumption (000b/d)
Table: Latin America Oil Production (000b/d)
Table: Latin America Oil Refining Capacity (000b/d)
Gas Supply And Demand
Table: Latin America Gas Consumption (bcm)
Table: Latin America Gas Production (bcm)
Liquefied Natural Gas
Table: Latin America LNG Exports/(Imports) (bcm)
Business Environment Ratings
Latin America Region
Composite Scores
Table: Regional Composite Business Environment Rating
Upstream Scores
Table: Regional Upstream Business Environment Rating
Downstream Scores
Table: Regional Downstream Business Environment Rating
Business Environment
Legal Framework
Infrastructure
Labour Force
Foreign Investment Policy
Tax Regime
Security Risk
Industry Forecast Scenario
Oil And Gas Reserves
Oil Supply And Demand
Gas Supply And Demand
Liquefied Natural Gas
Refining And Oil Products Trade
Revenues/Import Costs
Table: Venezuela Oil And Gas – Historical Data And Forecasts, 2008-2015
Other Energy
Table: Venezuela Other Energy – Historical Data And Forecasts
Key Risks To BMI’s Forecast Scenario
Oil And Gas Infrastructure
Oil Refineries
Table: Refineries In Venezuela
LNG Terminals
Gas Pipelines
Macroeconomic Outlook
Table: Venezuela – Economic Activity
Competitive Landscape
Executive Summary
Table: Key Players In Venezuela’s Oil And Gas Sector
Overview/State Role
Licensing And Regulation
Government Policy
Licensing Rounds
International Energy Relations
Table: Key Upstream Players
Table: Key Downstream Players
Company Monitor
PdVSA
Chevron
Total Venezuela
Repsol YPF Venezuela
BP – Summary
Statoil – Summary
Eni – Summary
Petróleo Brasileiro (Petrobras) – Summary
CNPC/Sinopec/CNOOC – Summary
Perenco – Summary
Galp Energia – Summary
BeloVenezolana – Summary
Others – Summary
Former IOC Partners – Summary
Oil And Gas Outlook: Long-Term Forecasts
Regional Oil Demand
Table: Latin America Oil Consumption (000b/d)
Regional Oil Supply
Table: Latin America Oil Production (000b/d)
Regional Refining Capacity
Table: Latin America Oil Refining Capacity (000b/d)
Regional Gas Demand
Table: Latin America Gas Consumption (bcm)
Regional Gas Supply
Table: Latin America Gas Production (bcm)
Methodology And Risks To Forecasts
Glossary Of Terms
Oil And Gas Ratings: Revised Methodology
Introduction
Ratings Overview
Table: BMI Oil And Gas Business Environment Ratings: Structure
Indicators
Table: BMI Oil And Gas Business Environment Upstream Ratings: Methodology
Table: BMI Oil And Gas Business Environment Downstream Ratings: Methodology
BMI Methodology
How We Generate Our Industry Forecasts
Energy Industry
Cross checks
Sources
- PdVSA
- Chevron
- Total Venezuela
- Repsol YPF Venezuela
- BP
- Statoil
- Eni
- Petróleo Brasileiro (Petrobras)
- CNPC/Sinopec/CNOOC
- Perenco
- Galp Energia
- BeloVenezolana
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