Orinoco Projects Ordered to Cut Shipments

Venezuela's government has instructed the four Orinoco crude oil projects to reduce synthetic crude exports by 3.3 million barrels a month, or 110,000b/d, energy and oil minister Rafael Ramirez told reporters.

The move is aimed at boosting oil prices and comes in the wake of the new government policy announcement involving the nationalization of Orinoco projects.

More specifically, the reduction is part of Venezuela's compliance with OPEC cuts. Last year, OPEC countries agreed to reduce production a combined 1.7 million b/d in two tranches.

"We have instructed the companies [to focus] the reduction on the exportable volumes, starting in January," Ramirez said. "The market needs to perceive there is strict compliance."

The reduction will focus on the synthetic crude exported after upgrading takes place rather than the heavy crude produced.

The four Orinoco projects are Ameriven, Petrozuata, Cerro Negro and Sincor.

Ameriven will have to reduce synthetic exports 800,000b/m, Petrozuata 700,000b/m, Cerro Negro 1.1 million b/m and Sincor 700,000b/m.

In the case of Sincor, the largest producer with 200,000b/d, the reduction is more than 10% of output. In the case of smaller operations such as Cerro Negro, the reduction amounts to 30%.

The four projects have a capacity to produce 620,000b/d but, according to the International Energy Agency, are churning out less than 600,000b/d.

Private-sector partners in Orinoco include ExxonMobil (NYSE: XOM), ConocoPhillips (NYSE: COP), Chevron (NYSE: CVX), Statoil (NYSE: STO), Total (NYSE: TOT) and BP (NYSE: BP).

Venezuela's oil export basket price lost US$3.59/b in the week January 8-12 from the week before, closing at US$46.87/b.

The oil basket has declined almost US$20/b since August 7-11, when it hit an all-time high of US$65.81/b.

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