Energy policy of Venezuela

Venezuela has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere.cite web | publisher= BBC |url= http://news.bbc.co.uk/1/hi/world/americas/4692534.stm | title = Venezuela: Energy overview | date = 2006-02-16 | accessdate=2007-07-10] In addition Venezuela has non-conventional oil deposits (extra-heavy crude oil, bitumen and tar sands) approximately equal to the world's reserves of conventional oil.cite web | publisher= World Energy Council |url= http://www.worldenergy.org/wec-geis/publications/default/tech_papers/17th_congress/3_1_04.asp | author = Pierre-René Bauquis | title = What the future for extra heavy oil and bitumen: the Orinoco case | date = 2006-02-16 | accessdate=2007-07-10]

Development of energy policies

Venezuela nationalized its oil industry in 1975-1976, creating Petróleos de Venezuela S.A. (PdVSA), the country's state-run oil and natural gas company. Along with being Venezuela's largest employer, PdVSA accounts for about one-third of the country’s GDP, 50 percent of the government’s revenue and 80 percent of Venezuela’s exports earnings.

The policy changed in the 1990s, when Venezuela introduced a new oil policy known as Apertura Petrolera, which opened its upstream oil sector to private investments. This facilitated the creation of 32 operating service agreements with 22 separate foreign oil companies, including international oil majors like Chevron, BP, Total, and Repsol-YPF. The role of PdVSA in making national oil policy increased significantly.cite web | publisher= Oxford Institute for Energy Studies |url= http://www.oxfordenergy.org/comment.php?9904 | author = Bernard Mommer | title = Changing Venezuelan Oil Policy | date = April 1999 | accessdate=2007-07-10] In 1999, Venezuela adopted the Gas Hydrocarbons Law, which opened all aspects of the sector to private investment.

This policy changed after Hugo Chávez took the presidential post in 1999. In recent years the Venezuelan government has reduced PdVSA’s previous autonomy and amended the rules regulating the country’s hydrocarbons sector. In 2001, Venezuela passed a new Hydrocarbons Law that superseded the previous 1943 Hydrocarbons Law and 1975 Nationalization Law. Under the 2001 law, royalties paid by private companies increased from 1-17% to 20-30%.cite web | publisher= Energy Information Agency | url = http://www.eia.doe.gov/emeu/cabs/Venezuela/pdf.pdf | title = Country Analysis Briefs. Venezuela | format = PDF | date = September 2006 | accessdate=2007-07-10] Venezuela started to strictly adhere to OPEC production quotas. The ownership separation of power generation, transmission, distribution and supply functions was required by 2003 but still not enforced.

Venezuela's new energy policy implemented by President Chavez in 2005 includes six major projects :
* Magna Reserve;
* Orinoco Project;
* Delta-Caribbean Project;
* Refining Project;
* Infrastructure Project;
* Integration Project.cite web | publisher= Business Wire | url = http://findarticles.com/p/articles/mi_m0EIN/is_2006_August_7/ai_n16609764 | title = PDVSA to Build Three New Refineries in Venezuela, and Industrial Info News Alert | date = 2006-08-07 | accessdate=2007-07-11]

In 2007, Chávez announced the nationalization of the oil industry.cite web | publisher= Turkish Weekly | author = Rovshan Ibrahimov | url = http://www.turkishweekly.net/comments.php?id=2515 | title = Nationalization Of Oil Sector In Venezuela: Action Or Reaction? | date = 2007-03-04 | accessdate=2007-07-10] The foreign oil companies were forced to sign agreements giving majority control of hydrocarbons projects to PdVSA. Projects owned by companies like ConocoPhillips and ExxonMobil, who failed to sign these agreement, were taken over by PdVSA.cite web | publisher= Financial Times | author = Benedict Mande | url = http://www.ft.com/cms/s/776105b8-2417-11dc-8ee2-000b5df10621.html | title = Venezuela takes over US oil projects | date = 2007-06-26 | accessdate=2007-07-10]

Primary energy sources

Oil

Venezuela has been producing oil for nearly a century and was an OPEC founder-member. It has convert|79.7|Goilbbl|m3 of proven conventional oil reserves, the largest of any country in the Western Hemisphere. In 2005, Venezuela produced 162 million tons of oil, which is 4.1% of world's total production. By the oil production Venezuela ranks seventh in the world.cite web | publisher= International Energy Agency | url= http://www.iea.org/dbtw-wpd/Textbase/nppdf/free/2006/key2006.pdf | title = Key World Energy Statistics -- 2006 Edition | format=PDF | date = 2006 | accessdate=2007-07-11] Venezuela is the world's eight oil exporter and fifth largest net exporter. It meets around 15% of US oil consumption.

Oil accounts for about half of total government revenues. The leading oil company is Petróleos de Venezuela S.A. (PDVSA), which according to the Venezuela's authorities produces convert|3.3|Moilbbl/d|m3/d. However, oil industry analysts and the U.S. Energy Information Administration believe it to be only 2.8-2.9 million barrels a day. Venezuela's main oil fields are located at four major sedimentary basins: Maracaibo, Falcon, Apure, and Oriental. PdVSA has convert|1.28|Moilbbl/d|m3/d of crude oil refining capacity. The major facilities are the Paraguaná Refining Center, Puerto de la Cruz, and El Palito.

Natural gas

Venezuela has the ninth largest gas reserves in the world and the biggest reserves in South America. Proved recoverable reserves are accounted 4,179 billion cubic meter (bcm). However, inadequate transportation and distribution infrastructure has prevented it from making the most of its resources. More than 70% of domestic gas production is consumed by the petroleum industry. Nearly 35% of gross natural gas output are re-injected in order to boost or maintain reservoir pressures, while smalleramounts (5%) are vented or flared. About 10% of production volumes are subject to shrinkage as a result of the extraction of NGLs.

The leading gas company is PdVSA. The largest private natural gas producer is Repsol-YPF, who supplies 80-megawatt (MW) power station in Portuguesa, and plans to develop a a 450-MW power plant in Obispos.

Tar sands and heavy oils

Venezuela has non-conventional oil deposits (extra-heavy crude oil, bitumen and tar sands) at convert|1200|Goilbbl|m3 approximately equal to the world's reserves of conventional oil. About convert|267|Goilbbl|m3 of this may be producible at current prices using current technology. The main deposits are located in the Orinoco Belt in central Venezuela (Orinoco tar sands), some deposits are also found in the Maracaibo Basin and Guanoco Lake, near the Caribbean coast.cite paper | title = Survey of energy resources | publisher = World Energy Council | date = 2004 | url = http://www.worldenergy.org/documents/ser2004.pdf | format = PDF | accessdate = 2007-07-13]

Coal

Venezuela has recoverable coal reserves of approximately 528 million short tons (Mmst), most of which is bituminous. In 2004, Venezuela produced 8.96 Mmst of coal. Most coal exports go to Latin American countries, the United States and Europe. The main coal company in Venezuelas is Carbozulia, a former subsidiary of PdVSA, which is controlled by Venezuela’s state development agency Corpozulia. The major coal producing region in Venezuela is the Guasare Basin, which is located near the Colombian border. The coal industry development plans include the construction of a railway linking coal mines to the coast and a new deepwater port.

Electricity

The main electricity source is hydropower, which accounts for 71% in 2004. A gross theoretical capability of hydropower is 320 TWh perannum, of which 130 TWh per annum is considered as economically feasible. In 2004, Venezuela produced 70 TWh of hydropower, which accounts 2.5% of world's total. At the end of 2002, total installed hydroelectric generating capacity accounted 13.76 GW with additional 4.5 GW under construction and 7.4 GW of planned capacity.

Hydroelectricity production is concentrated on the Caroní River in Guayana Region. Today it has 4 different dams. The largest hydroplant is the Guri dam with 10,200 MW of installed capacity, which makes it the third-largest hydroelectric plant in the world. Other hydroelectric dams on the Caroní are Caruachi, Macagua I , Macagua II and Macagua III, with a total of 15.910 MW of installed capacity in 2003. A new dams, Tocoma (2 160 MW) and Tayucay (2 450 MW), are currently under construction between Guri and Caruachi. With a projected installed capacity for the whole Hydroelectric Complex (upstream Caroni River and downstream Caroni River), between 17.250 and 20.000 MW in 2010.

(THIS SECTION IS OUT OF DATE. Electricidad de Caracas has been nationalized.)

The largest power companies are state-owned CVG Electrificación del Caroní (EDELCA), a subsidiary of the mining company Corporación Venezolana de Guayana (CVG), and Compania Anonima de Administracion y Fomento Electrico (CADAFE) accounting respectively for approximately 63% and 18% of generating capacities. Other state-owned power companies are ENELBAR and ENELVEN-ENELCO (approximately 8% of capacities). The rest of the power production is owned by private companies. The largest private power company is La Electricidad de Caracas (EDC), majority-owned by the US-based AES Corporation, (11% of capacities), which owns the majority of conventional thermal power plants.cite web | publisher= International energy regulation network |url= http://www.iern.net/country_factsheets/market-venezuela.htm | title = Venezuela | date = July 2006 | accessdate=2007-07-11] cite web | publisher= World Energy Council |url= http://www.worldenergy.org/wec-geis/congress/papers/acostam0904.pdf | author = Manuel Augusto Acosta Pérez | author2 = Juan José Rios Sanchez | title = The electric business in Venezuela:restructuring and investment opportunities | date = 2004-09-05 | accessdate=2007-07-10]

The national transmission system (Sistema Inrterconectado Nacional- SIN) is composed by four interconnected regional transmission systems operated by EDELCA, CADAFE, EDC and ENELVEN-ENELCO. Oficina de Operacion de Sistema Interconectados (OPSIS), jointly-owned by the four vertical integrated electric companies, operate the SIN under an RTPA regime.

Environmental issues

Prolonged oil production has resulted with significant oil pollution along the Caribbean coast. Hydrocarbons extraction has resulted also with subsiding of the eastern shore of Lake Maracaibo, the South America's largest lake. Venezuela is also the region's top emitter of carbon dioxide.

Regional cooperation

Venezuela has pushed the creation of regional oil initiatives for the Caribbean (Petrocaribe), the Andean region (Petroandino), and South America (Petrosur), and Latin America (Petroamerica). The initiatives include assistance for oil developments, investments in refining capacity, and preferential oil pricing. The most developed of these three is the Petrocaribe initiative, with 13 nations signed agreement in 2005. Under Petrocaribe, Venezuela will offer crude oil and petroleum products to Caribbean nations under preferential terms and prices. The payment system allows for a few nations to buy oil on market value but only a certain amount is needed up front; the remainder can be paid through a 25 year financing agreement on 1% interest. The deal allows for the Caribbean nations to purchase up to convert|185|Moilbbl|m3 of oil per day on these terms. In addition it allows for nations to pay part of the cost with other products provided to Venezuela, such as bananas, rice, and sugar.

In 2000, Venezuela and Cuba signed an agreement, which grants Venezuelan oil supplies to Cuba.

In 2006, the construction of the Trans-Caribbean gas pipeline, which will connect Venezuela and Colombia with extension to Panama and probably to Nicaragua, started . The pipeline will pump gas from Colombia to Venezuela and, after 7 years, from Venezuela to Colombia.cite web | publisher= Granma International |url= http://news.notiemail.com/noticia.asp?nt=9796101&cty=200 | title = Construction starts on Colombia-Venezuela natural gas pipeline | date = 2006-07-08 | accessdate=2007-07-03] Venezuela has also proposed the project of Gran Gasoducto del Sur, which would connect Venezuela with Brazil and Argentina.cite web | publisher= Pipeline & Gas Journal |url= http://www.oildompublishing.com/PGJ/pgj_archive/August06/pipelineconstreport.pdf | title = 2006 International Pipeline Construction Report | format = PDF | date = August 2006 | accessdate=2007-05-12] There has been some discussion about constructing an oil pipeline to Colombia along the Pacific Ocean.

Venezuela also exports electricity to neighbouring countries. Santa Elena/Boa Vista Interconnector permits electricity export to Brazil, and Cuatricenternario/Cuestecitas Interconnector and EI Corozo/San Mateo Interconnector to Colombia.

References