"To start, most of Venezuela's oil reserves, located in the Orinoco belt, are classified as heavy and extraheavy. These highly viscous grades must be blended with diluent and upgraded into lighter oil to be extracted, transported and processed. All this raises the production costs. The energy-intensive upgrading process also increases the carbon footprint of these heavy grades, which could push up costs further if more governments start taxing emissions or raising existing levies."
"The opportunity must be compelling enough to offset the substantial political risk that will persist in the years ahead, according to Carlos Bellorin, an analyst at consultancy Welligence Energy. As it stands, Venezuela doesn't seem to fit the bill. Of course, that could change if a new industry-friendly Venezuelan government were to make changes to taxation and royalty policies, greatly reducing the average cost. But that remains a big if."
Most of Venezuela's oil reserves in the Orinoco belt are heavy and extraheavy. These highly viscous grades must be blended with diluent and upgraded into lighter oil for extraction, transport and processing. The energy‑intensive upgrading raises production costs and increases the carbon footprint, which could raise costs further if emissions are taxed or levies rise. High extraction and upgrading costs, combined with substantial and persistent political risk, make attracting U.S. majors difficult absent compelling commercial terms. A change to industry‑friendly taxation and royalty policies could reduce average costs, but that remains uncertain. Rystad estimates $183 billion of capital spending through 2040 to restore 3 million barrels per day.
Read at www.esquire.com
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