PDVSA Official Says Venezuela Oil Drilling Activity Robust

CARACAS (Dow Jones), Dec. 9, 2009

A top official at state energy firm Petroleos de Venezuela, or PdVSA, said Tuesday that more oil drilling is taking place in Venezuela than the country is being given credit for.

"The news media that's controlled by the opposition (those opposed to the administration of President Hugo Chavez) says there are only 56 drills in Venezuela. Those figures are false," said Eulogio Del Pino, head of exploration and production at PdVSA, in a press release from the company.

According to Del Pino, there are actually 140 active drills in Venezuela, of which 50 are PdVSA-owned, with the other 90 owned by contractors.

Del Pino made his statements at a meeting with other PdVSA oil officials in the eastern Orinoco region, where PdVSA is pinning most of its high hopes for future oil production.

PdVSA often finds itself defending the amount of oil drilling activity actually taking place in Venezuela.

The state-owned firm says production averages 3 million barrels a day this year, while independent observers say it's closer to 2.2 million barrels a day.

Regardless of the current output, Del Pino said future production just in the Orinoco, where vast reserves of heavy and extra-heavy crude have been discovered, will reach 3 million barrels a day over the next 10 years, from the current 1 million barrels a day.

Such production levels will indeed be necessary if Venezuela hopes to retain its spot as South America's top producer and exporter of crude oil. Both PdVSA officials and independent observers say the mature oil fields in western Venezuela, where most of the country's production currency comes from, are slowly running dry.

PdVSA's ability to deliver on its goals of turning the Orinoco region into Venezuela's oil production powerhouse will depend a lot on the upcoming Carabobo drilling tender in early 2010, where major oil companies including Chevron, Chinese state oil firm CNPC and BP PLC, could offer bids to develop blocks in the region.

The oil companies would work under a joint venture with PdVSA, which would have a majority 60% stake to the oil companies' 40% stake. Lower oil prices and concerns over royalties, taxes and other contractual issues have delayed the auction from already taking place.

In all, the Carabobo blocks could produce 1.2 million barrels a day within a few years, PdVSA has said.

Another project getting notoriety in the Orinoco is the Junin fields, in which PdVSA has issued direct licenses (as opposed to an auction) to Russian firms and other companies from ally nations, who would then drill alongside PdVSA.

Copyright (c) 2009 Dow Jones & Company, Inc.