VENEZUELA LNG PROJECT: A LATIN AMERICAN GIANT JOINS

VENEZUELA LNG PROJECT:
A LATIN AMERICAN GIANT JOINS THE GAME
LE PROJET GNL DU VENEZUELA :
UN GEANT LATINO-AMERICAIN ENTRE EN JEU
Jose Estevez, New Business Development Manager
PDVSA Gas
Av. Francisco de Miranda, Edif. Sucre, La Floresta
Caracas 1060-A, Venezuela
Rafi Baghdjian, Business Development Manager
Shell International Gas Ltd.
Shell Centre, London SE1 7NA, United Kingdom
J. B. King, Project Manager
ExxonMobil Gas Marketing
800 Bell St., Rm 3677G
Houston, Texas 77002, USA
Victor Ojeda, Business Development Manager
Mitsubishi Corporation
Av. Francisco de Miranda, Torre Seguros Caracas, Piso2
Caracas, Venezuela
ABSTRACT
In March 2000, PDVSA Gas, Shell, ExxonMobil and Mitsubishi launched a detailed
feasibility study for the Venezuela LNG (VLNG) Project. A single train will produce
approximately four million tonnes per annum LNG using gas from the offshore North
Paria fields located near the Paria Peninsula in eastern Venezuela. This approximately
US$2billion capital development is initially targeting the USA as the anchor market,
while considering options to supply other prime Atlantic Basin markets through
subsequent expansions.
The VLNG Project builds on nearly a decade's work on Proyecto Cristobal Colon
(PCC) to create a world-scale LNG project in eastern Venezuela. VLNG now stands
poised to capitalize on Venezuela's new regulatory and fiscal environment to capture an
attractive market window.
VLNG is also expected to represent the springboard for the creation of a new
industrial complex in eastern Venezuela where regional reserves could support other
forms of gas industrialization, such as petrochemicals and gas-to-liquids, among others.
The VLNG Project enjoys the following primary advantages: (a) proximity to
Venezuela's abundant gas reserves (146 TCF proved); (b) Venezuelan Government
commitment to LNG as a means to monetize gas; (c) a prime geographic location in the
Atlantic Basin relative to markets; (d) extensive worldwide LNG project experience
among the VLNG Sponsors; and, (e) a strong commitment to accelerated project
advancement.
PS3-4.1
RESUME
En mars 2000, PDVSA Gas, Shell, ExxonMobil et Mitsubishi ont lancé des études
détaillées sur le nouveau projet GNL de Venezuela (VLNG). Les premières quantités de
GNL parviendront d’une premiere châine de production de GNL qui produira
approximativement quatre million de tonnes par an. Le gaz nécessaire pour cette châine
de production sera approvisionné à partir des champs gaziers du nord de Paria qui se
situent off-shore de la péninsule de Paria. Le coût initial du projet s’élèvera à US$2
milliard. Les marchés des Etats-Unis sont visés en premier en tant que marché principal,
tandis que les autres marchés du bassin de l’Atlantique seront visés par les expansions du
projet.
VLNG utilisera les résultats d’études qui ont été entrepris pendant plus d’une
décennie par le précédent Project Cristobal Colon, pour créer un nouveau project de
dimension mondiale. VLNG prendra avantage des nouvelles lois Venezueliennes pour
conquérir les marchés qui viennent de se développer.
VLNG représente aussi le premier maillon dans la création d’une nouvelle cité
industrielle située dans l’est du Venezuela où se trouvent des quantitiés suffisantes de gaz
pour l’expansion de ce Project ainsi que pour approvisionner de nouvelles industries, par
example pétrochimique et transformation du gaz en liquide petrolier.
Le Project VLNG a les avantages suivants: (i) la proximité des réserves de gaz en
abondance au Venezuela avec ces 146 Tcf , (ii) une détermination du gouvernement du
Venezuela de monétiser le gaz du pays, (iii) le Venezuela jouit d’une situation
géographique avantageuse par rapport aux marchés situés sur le bassin de l’Atlantique,
(iv) les partennaires du VLNG ont une expérience mondiale de première classe en GNL et
(v) ces partennaires sont fortement commit à accélérer l’accomplissement de ce project.
PS3-4.2
VENEZUELA LNG PROJECT:
A LATIN AMERICAN GIANT JOINS THE GAME
VENEZUELA GAS PROFILE
Generous proven natural gas reserves (146 TCF) rank Venezuela 7th in the world and
the first in Latin America. The opening of the non-associated gas E&P sector to private
investment may generate substantial reserve additions in the order of 80 Tcf.
These vast gas resources, coupled with Venezuela’s extensive experience as a major
oil and gas producer, lay the foundation for world-class gas developments. Moreover,
Venezuela’s geographic location is optimal for reaching out to the Atlantic Basin markets,
such as US Gulf and East Coasts, Central/South America, Brazil and the Iberian
Peninsula, giving Venezuela an advantage over competing gas suppliers.
The Venezuelan government has demonstrated its commitment to the development of
the natural gas sector. Indeed, Venezuela recently enacted the Gaseous Hydrocarbons
Organic Law (Gas Law), and created a fiscal framework providing key incentives to the
sector. The Gas Law allows for private participation and sets the stage for a full range of
natural gas businesses.
OVERALL PROJECT DESCRIPTION:
The “Venezuela LNG” project is an integrated project comprising the development of
the offshore North Paria gas fields, construction and operation of gas liquefaction, storage
and delivery facilities, all the way through to marketing to Atlantic Basin gas consumers.
The project’s first phase will be a single train development delivering 4 MTPA of
liquefied gas, based on approximately 700 MMSCFD gas production. The plant will be
located adjacent to the main gas reserves in the country, providing flexibility for future
expansions.
PS3-4.3
VLNG RESERVES AND LOCATION:
62º
15º
10º
Mejillones
Dragon
Patao
05º
subsea
11º
11º
Rio Caribe
55º
Separate gas & liquids lines
50º
45º
PENINSULA DE PARIA
0
5
10
15
40º
km
Guiria
35º
45º
40º
35º
30º
25º
20º
15º
10º
05º
62º
55º
50º
45º
40º
The Rio Caribe Field, and the three Norte de Paria Fields (Mejillones, Patao, and
Dragon) define the 700 km2 gas development area. Rio Caribe reservoirs contain rich gas;
the Norte de Paria Fields are dry gas reservoirs. Water depth is approximately 100m.
In the 1980’s, 9,050 linear km of 2D seismic was shot offshore Norte de Paria, and 13
exploratory wells were drilled in the Rio Caribe and Norte de Paria areas. Subsequently,
the Proyecto Cristobal Colon (PCC; same sponsors as VLNG) shot 1,426km2 of 3D
seismic, culminating in a gas initially in place (GIIP) estimation of over 14 TCF. Rio
Caribe field is estimated to contain 50 million barrels of condensate reserves.
Recent work has focused on reinterpreting the extensive PCC 3D seismic work as
well as the earlier exploration wells. At present, a single process platform is envisioned
for Rio Caribe, with unmanned wellhead facilities at Mejillones, Patao and Dragon. An
appraisal drilling program is slated for the second half of 2001 to further support the
development plan eventually to be approved by the Ministry of Energy and Mines within
the context of the license.
VLNG PLANT AND LOCATION:
A meticulous site selection study was commissioned for the proposed air-cooled,
mixed-refrigerant plant. From a total of 18 areas on the Paria Peninsula, six potential sites
have been short-listed, though the final site for the plant has not yet been chosen. Since
the sponsors recognise that the Paria region is an environmentally and socially sensitive
area, the ultimate location will benefit from environmental and social impact assessments
(EIA and SIA), as well as an extensive consultation programme with stakeholders.
PS3-4.4
Construction and operation of the facilities will be carried out according to international
best practice, in keeping with the sponsors' commitment to the principles of sustainable
development.
RECENT DEVELOPMENTS AND WAY FORWARD:
Following close on the heels of a Memorandum of Understanding amongst the project
partners in March 2000, a Preliminary Development Agreement (PDA) was signed in
May 2000. The PDA establishes the framework (budget, resources, and schedule) for a
detailed feasibility study that will provide the necessary basis for moving ahead with
appraisal drilling and basis of design. The study is comprised of two phases. The first,
which concluded end November 2000, established the parameters under which the project
would be feasible. The second, following legal and fiscal assurances from the Venezuelan
government, will add further project definition with a view to signing a Joint Venture
Agreement by June 2001.
June 2001
(+ 22 months)
• JVA
• Stabilisation
Package
• Conditional
SPAs
Apr. 2003
• FID
• Appraisal Drilling
• EPC Tendering
(+ 32 months)
• Construction
Dec. 2005
• First Cargo
• EPC Award
• Financing
Underwriting
• Unconditional SPAs
VLNG’s sponsors wield the advantage of having first hand experience in many LNG
projects worldwide, with a proven track records in developing, financing and marketing
these type of projects. Similarly, the sponsors will be able to apply the latest technological
and contracting innovations. Given the favorable conditions for the project, the sponsors
are fully committed to making VLNG a near-term reality.
Contact Information
Author/presenter:
Jose Estevez, New Business Development Manager, PDVSA Gas
Av. Francisco de Miranda, Edif. Sucre, La Floresta,
Caracas 1060-A, Venezuela
Ph: +58-2-208-6340, Fax: +58-2-208-6708
e-mail: [email protected]
Co-authors:
Rafi Baghdjian, Business Development Manager, Shell International Gas Ltd.
Shell Centre, London SE1 7NA, United Kingdom
Ph: +44-207-9343036, Fax:+44-207-9347321
e-mail: [email protected]
J. B. King, Project Manager, ExxonMobil Gas Marketing
800 Bell St., Rm 3677G, Houston, Texas 77002, USA
Ph.: +1-713-656-9397, Fax: +1-713-656-5005
e-mail: [email protected]
Victor Ojeda, Business Development Manager, Mitsubishi Corporation
Av. Francisco de Miranda, Torre Seguros Caracas, Piso2, Caracas, Venezuela
Ph: +58-2-209-7480, Fax +58-2-209-7483
e-mail:[email protected]
PS3-4.5