Venezuela moves toward gas-based power sector

Venezuela will substitute an expected 78,000b/d of diesel shipments to the electric power sector this year with cleaner burning natural gas, state oil company PDVSA said.

Gas supplies will be made to the Josefa Camejo, Termocarabobo, India Urquía and Termozulia thermoelectric plants, all of which can run on either diesel or gas, according to a company statement.

Calling gas the "energy of the future for the development of Venezuela" and neighboring countries in Latin America, the head of PDVSA's gas division, Antón Castillo, cited the potential of gas to supply the electric, petrochemical, industrial, domestic and commercial sectors.

The announcement follows the launch of production in July at the offshore Cardón IV block, a 50:50 JV between Eni and Repsol expected to reach production of 450Mf3/d in 2015 and 1.2Bf3/d by 2020.

In a July presentation, the Venezuela head of consultancy Gas Energy, Antero Alvarado, said that the country's power sector consumes nearly 150,000b/d of diesel - more than any country in Latin America - and that although Venezuela produces around 7.5Bf3/d of gas, only about 2.2Bf3 flows to the domestic market. The rest is consumed by the oil industry.

At a natural gas event last week in Chile, economist Roberto Cunha of consultancy IHS noted that about 70% of the gas currently produced in Venezuela is either reinjected into oil wells or flared off.

To date, Castillo said, 192,705 homes in Venezuela have access to piped natural gas.

EXPORT POTENTIAL

Those attending the Chile event, which was sponsored by regional oil and gas association Arpel, were split down the middle on whether Venezuela will be able to become a gas-exporting "game-changer" over the next decade.

Gas-hungry neighbors Colombia and Trinidad, which both face declining reserves, are natural candidates to receive Venezuelan gas and thus inject much-needed dollars into Venezuela's ailing economy, Alvarado said, also pointing to the islands of Aruba, Curaçao and Bonaire.

Venezuela sits on the second-largest gas reserves in the Americas, with proven reserves standing at 197Tf3.

However, as BNamericas' 2016 Oil and Gas Outlook points out, Venezeula's problem has never been resources, but rather "mismanagement, poor infrastructure, corruption and the spending demands of a crumbling government."