Chevron announced on April 13 that it had reached agreements with the Venezuelan government to expand its operations in the world’s largest extra-heavy crude oil field.
The American energy giant inked two agreements to grow its presence in the South American nation’s Orinoco Belt, which overlies the largest proven reserves of extra-heavy crude oil on the planet.
It covers approximately 50,000 square kilometers (19,000 square miles) and is underlain by more than 1 trillion barrels of heavy oil-in-place, according to the U.S. Geological Survey.
Extra-heavy crude is primarily used to make fuels such as gasoline, diesel, and kerosene, as well as in the production of asphalt, bitumen, and industrial lubricants. Heavy crude oil also is thick and “sour” (high sulfur), and harder to refine.
The deal included an asset swap with the state-owned firm Petroleos de Venezuela (PDVSA) and all its subsidiaries in what Chevron described as a “mutually beneficial agreement which will consolidate all parties’ focus on strategic assets in the country,” in an April 13 press release.
In exchange for the extra-heavy crude-rich Ornoco Belt region being added to its main project, Chevron will give up an offshore gas field and a small crude area to PDVSA, according to the agreement.
Under the agreement, Chevron will receive an additional 13.21 percent working interest in the Petroindependencia, S.A. joint venture, increasing its total stake from 35.8 percent to 49 percent.
On top of this, the Petropiar, S.A. joint venture, in which a Chevron subsidiary holds a 30 percent interest, has been assigned the rights to develop the adjacent Ayacucho 8 area located in the Orinoco Oil Belt of Venezuela.
In return, Venezuela will receive 60 percent and 100 percent operated interests in the Plataforma Deltana Block 2 and Block 32gas licenses, located in the Loran offshore field, from Chevron subsidiaries, and its 25.2 percent non-operated interest in the Petroindependiente, S.A. joint venture located in the west of the country.
“This agreement expands Chevron’s heavy oil position in two key joint ventures in Venezuela and reflects our disciplined development of the country’s significant resources. Ayacucho 8 is a producing asset in close proximity to Petropiar, which enhances development efficiencies,” said Javier La Rosa, president of Chevron Base Assets and Emerging Countries.
“This asset swap marks another important step in Chevron’s long history in Venezuela and reinforces our role in supporting regional energy security,” he said.
The agreements are among the first big deals since the United States initiated a $100 billion reconstruction plan for the Venezuelan energy industry after capturing former Venezuelan President Nicolás Maduro in January
Chevron executives said during an earnings call in January that the company could boost output in Venezuela by about 50 percent over the next two years within its existing footprint.
During that same call, Chevron said its joint ventures with PDVSA are producing around 250,000 barrels per day of crude oil, amounting to a quarter of Venezuela’s total output, according to Reuters.
According to data from the Organization of the Petrolem Exporting Countries (OPEC), of which Venezuela is a member state, the country was producing more than 3 million barrels of oil per day in 1997, but production fell off a cliff due to under the socialist rule of Hugo Chavez and Maduro, eventually dropping to an all-time low of just under 400,000 barrels per day in 2020.
Chevron was the only major U.S. oil company that stayed in Venezuela after nationalization two decades ago, with all others pulling out.
However, following Maduro’s ouster and subsequent reforms, other American giants have been eying operations inside the country.
“It’s absolutely critical in the short term that we get a technical team in place to assess the current state of the industry and the assets, understand what will be involved to help the people of Venezuela get production back on the market,” Woods said.
Woods, who made the comments during a meeting at the White House with U.S. President Donald Trump, said at the time that the South American country is currently uninvestable, and would require appropriate security guarantees before recentering the market.
“We’ve had our assets seized there twice. And so, you can imagine to reenter a third time would require some pretty significant changes from what we’ve historically seen here and what is currently the state,” Woods said.
ExxonMobil announced in March that it had a team in Venzuela evaluating the country’s oil and gas resources and infrastructure.
“What we’re looking to assess is the state of the resource that’s there, but more importantly, what’s the state of the infrastructure on the ground?” the company’s upstream head Dan Ammann said at a conference in Houston.
