PetroFalcon to Invest US$60mn to Produce 40mcf/d

California-based oil company PetroFalcon will invest US$60mn in the next 3-4 years in Venezuela to produce 30-40 million cubic feet a day (mcf/d) natural gas and 60,000 barrels a day (b/d) oil by 2005-2006, CEO Bill Gumma said at end-June in a presentation to the Canadian Association of Petroleum Producers (CAPP).

PetroFalcon will drill three wells on its La Vela field and reactivate three existing wells. This "is what we envisage as phase one of a gas production program," spokesperson Dubravka Kisic told BNamericas. State oil company PDVSA drilled three wells on La Vela in the 1980s while looking for crude, but found only gas and cased them. PetroFalcon believes there is production potential of 10mcf/d gas, as well as 300 barrels a day (b/d) crude, and this month will bring a workover rig to the field, which could double potential oil production, Gumma said.

The La Vela field is on a 400,000-acre onshore block that extends into a 160,000 offshore block, where there are substantial proven and tested reserves, again known as the result of past PDVSA oil exploration, this time in the 1970s.

The block holds 133 billion cubic feet (bcf) gas and 21 million barrels oil, and has five proven tested structures. PetroFalcon plans to twin structure four, which is closest to shore, with La Vela, tying in its production to the onshore activity. Structure four has tested 24mcf/d gas production and 1,000b/d oil, and in total the onshore and offshore structures have a "little over a half a tcf of proven and probable reserves, all on structures that have been drilled and tested," Gumma said.

PetroFalcon is reinterpreting 3D seismic studies on the other structures with PDVSA, and once a comprehensive study of onshore and offshore resources is in place, it will return to the negotiating table with PDVSA's Paraguana refinery for the refinery to buy the gas, Kisic said.

There is an acute gas shortage in the area, Gumma said in the CAPP presentation, adding that the Paraguana refinery would use the gas rather than the oil it presently uses for power generation. Today, the refinery is burning US$700,000 a day of oil for power generation, he said. Replacing oil with gas would make more liquids available for export, as well as cut emissions.

PDVSA has plans to build a 275km east-west interconnection gas pipeline (ICO), which would pass very close to PetroFalcon's properties, giving access to Paraguana and nearby petrochemical facilities. If PetroFalcon decides to go ahead with its project before the ICO is built, it would build a smaller, 100mcf/d pipeline from La Vela to the Paraguana refinery. Houston-based Mustang Engineering is currently working on feasibility studies for the La Vela field, and is expected to finish in mid-August, Kisic said.

La Vela is one of two fields on the East Falcon block. The other is Cumarebo, where production is presently 1200boe/d, through 500b/d crude, 200b/d condensates and 6mcf/d gas. PetroFalcon started producing and supplying the gas earlier this month to a cement plant belonging to Cementos Caribe in a contract that was the first time an independent producer made a deal with an independent client, Gumma said. "It's truly the opening of the Venezuelan gas market," he added.

Elsewhere in Venezuela, PetroFalcon is in the final signing stages for the 480,000-acre Agua Salada exploration block, which Gumma described as Venezuela's last undrilled structure. The agreement is currently under consideration by the government's council of ministries, Kisic said, preferring not to comment further until the signing process is complete. PetroFalcon owns 100% of its Venezuelan assets and has the resources required for its projected business development plan. "But we'll always keep the option open to bring in a partner under the right circumstances," Kisic said.

PetroFalcon was created in June through a reverse takeover with Pyridium Industries of Venezuelan-owned company Vinccler Oil and Gas, and in 2-3 years "intends to emerge as the dominant gas supplier in Venezuela," Gumma said.

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