Venezuela Energy Profile 2012

Venezuela a powerful oil producer in the world and exporting products and crude oil refining up the bulk of exports. To provide more income for use in the development of the nation's oil industry was nationalized in 1976. Venezuela is also a major producer of natural gas, bauxite and iron ore. Diamonds, gold, and coal are also produced.

The majority of production comes primarily from the region of Lake Maracaibo, and to a lesser extent, the northern part of the Llanos. In a greater potential importance, although difficult and expensive to extract, it is the huge oil reserves locked in the sands of the Orinoco Belt. 

The latest Venezuela Oil & Gas Report forecasts that the country will account for 8.26% of Latin American oil demand by 2015, while providing 24.86% of supply. Latin American regional use averaged an estimated 8.4mn barrels per day (b/d) in 2010. It should rise to 8.62mn b/d in 2011 and reach 9.29mn b/d by 2015. Regional oil production averaged an estimated 9.92mn b/d in 2010 and is set to rise to 12.47mn b/d by 2015. Oil exports have been slipping, because demand growth has exceeded the pace of supply expansion. In 2001, the region was exporting an average of 3.24mn b/d. This total fell to an estimated 1.51mn b/d in 2010 and is forecast to rebound to 3.17mn b/d in 2015. The principal exporters will be Mexico, Venezuela, Colombia and Brazil.

The region consumed an estimated 190bn cubic metres (bcm) of natural gas in 2010, with demand of 233bcm targeted for 2015. Production of an estimated 203bcm in 2010 should reach 254bcm in 2015, implying more than 20bcm of net exports at the end of the period. Venezuela contributed an estimated 11.2% to 2010 regional gas consumption and produced around 10.1%. By 2015, it is expected to consume 11.24% of the region’s gas, while contributing 12.29% to supply.

The 2010 full-year outturn was US$77.45/bbl for OPEC crude, which delivered an average for North Sea Brent of US$80.34/bbl and for West Texas Intermediate (WTI) of US$79.61/bbl. The  price target of US$77 was reached thanks to the early onset of particularly cold weather, which drove up demand for and the price of heating oil during the closing weeks of the year.

Global GDP growth is forecast to be 3.6% in 2011, down from 4.3% in 2010. Growth in both the US and Eurozone should be marginally higher than 2010, but Chinese economic expansion will slow and Japan’s growth will slump to 0.7% as a result of the devastating earthquake and tsunami in March 2011. BMI calculates that Venezuelan real GDP fell 2.0% in 2010, with an average annual increase of 1.7% expected in 2010-2015.

State-owned Petróleos de Venezuela (PdVSA) works in cooperation with numerous international oil company (IOC) partners in conventional and heavy oil projects. Although recent renationalisation moves, changes in taxation and alterations to the licensing system have reduced foreign involvement, several key players appear committed to the country’s heavy oil schemes. We are assuming oil and gas liquids production of 3.10mn b/d by 2015, with the country expected to pump 2.54mn b/d in 2011. Consumption beyond the economic weakness of 2009/10 is forecast to increase by up to 2% per annum to 2015, implying demand of 767,000b/d by this point. The export capability would therefore be about 2.33mn b/d by 2015. Gas production is forecast to rise from an estimated 20.5bcm in 2010 to just over 31bcm over the period, providing 5bcm of export potential in 2015.

Between 2010 and 2020, we forecast an increase in Venezuelan oil production of about 60%, with liquids volumes averaging 2.52mn b/d in 2010 before rising steadily to 4.00mn b/d by 2018-2020. Oil consumption between 2010 and 2020 is set to increase by 10.5%, with growth slowing to an assumed 1.0% per annum towards the end of the period and the country using 807,000b/d by 2020. Gas production is expected to rise steadily, from an estimated 20.48bcm in 2010 to 42.0bcm in 2020. Demand growth of 30% implies export potential rising to 12.2bcm by 2020. Details of BMI’s 10-year forecasts can be found in the appendix to this report.

Venezuela now shares fifth place with Trinidad & Tobago (T&T) in BMI’s composite Business Environment Ratings (BERs), which combine upstream and downstream scores. It lags Brazil and Peru in third place in BMI’s updated upstream ratings, having held much of its ground thanks to its vast hydrocarbons resource base. Although now four points behind Brazil and Peru, its position is far from secure unless the overall risk situation improves dramatically. As well as high scores for reserves, production growth potential and reserves-to-production ratios (RPR), Venezuela benefits from the number of international companies active within its upstream industry.