SAGD and JIVE: The Feasibility of Future Production Techniques of Venezuela's Heavy and Sour Oil Fields.

As I mentioned in an earlier post, Venezuelan oil reserves, while vast, are very heavy and sour. This type of oil is generally more expensive to both extract and refine, cutting into the countries overall profit margin. This presents a number of problems for the country including difficulties finding domestic impetus to fund necessary upkeep and repairs, problems securing FDI to further advance production, and challenges reaching a global market in general, since transportation to growing economies means higher transportation costs, further eating in to profit.

As the price of a global barrel of oil climbs however, the costs associated with extracting and refining Venezuelan oil become more and more manageable. This article from "The oil Drum blog goes over the two main types of extraction techniques that will be used more and more extensively. They are called SAGD and JIVE.

SAGD stands for Steam Assisted Gravity Drainage, and is currently being developed for use in Venezuela. This technique consists of Steam being pumped horizontally drilled well which heats the oil there, making it less viscous and easier to pump through to a secondary well where it is then extracted to the surface.

In JIVE, or Joint Implementation Vapor Extraction can also be used. this technique is similar to SAGD but it pumps kerosine ahead of the steam which acts to force more steam through the oil to heat it even further.

While these processes are effective for extracting the kind of heavy oil that is found in Venezuela's oil fields, they are very expensive, and further development of such techniques are said to be contingent on the increasing price of oil on the global market and the extent to which Venezuela can attract investors.

Current FDI projects:

As can be seen from the above map, Venezuela has numerous international firms operating within the Orinoco Heavy Oil Belt, however there have been rumors that the Chavez regime and its state run firm PDVSA has been hampering efforts by these private sector firms to ramp up production. This is curious indeed as publicly, Chavez has claimed that he is looking for investment from almost any credible source.

A recent Wikileaks cable has shown how some firms have come up against difficulties with the regime recently. "Setty", a reporter working out of South America and publishing on the oil and mineral industries there had this to say on his blog:

BELOW IS QUOTED FROM WWW.SETTYSOUTHAM.WORDPRESS.COM


This Wikileaked U.S. government cable adds some details to what we already knew about how Venezuela’s nationalization of maritime companies in Lake Maracaibo had caused delays to oil and gas drilling.

Repsol Drill Project Manager for the Rafael Urdaneta offshore natural gas exploratory well told Petroleum Attache…that PDVSA recently seized vessels in the Gulf of Venezuela owned by Venezuelan launch company Terminales Maracaibo that had been servicing the off-shore rig. The service company has the contract to provide Chevron, Repsol, and Teikoku with launch services in the Gulf to transport crew and supplies to the rig. Terminales Maracaibo continued to operate vessels not expropriated in May 2009 until PDVSA recently expanded the scope of the expropriation beyond assets physically located on Lake Maracaibo. XXXXXXXXXXXXX indicated that Repsol has not been able to find a replacement launch company (as there are few private launch companies left in Venezuela) and is increasingly reliant on PDVSA to provide launch services to maintain its drilling program.

XXXXXXXXXXXXX also noted that during the first week of drilling, the rig was shut down for 36 hours due to a shortage of diesel fuel. The rig temporarily shut down again the weekend of August 1 due to another fuel shortage. Problems within PDVSA’s domestic fuel distribution system are driving this problem… XXXXXXXXXXXXX shared that Repsol had been unable to lease some specialized drill tools from Schlumberger as it had exported them out of Venezuela and was not willing to bring them back.

Here’s a bit of what I wrote for Energy Intelligence’s Oil Daily in October:

Work crews on the lake have more down time, maintenance crews lack proper equipment, and vessels of all sorts are increasingly out of service since PDV took over more than 70 service and supply companies, the executives said…Workers now spend about a fifth of their time idle, waiting for PDV-operated support vessels such as boats that transport crews and supplies and tugs, officials at two companies said. That reduces the productivity of each piece of equipment on the lake. Transporting equipment — a motor, a crane or a whole oil rig — now takes several days longer than it did two years ago, officials said.