The Energy Regulation and Markets Review - Stikeman Elliott

Venezuela
intended projects and vision for the future development of the oil and gas industry in
Venezuela. The list of the most important projects includes:
a PDVSA’s intention to focus on areas that have been already explored and that are
currently producing crude oil (with respect to exploration of condensate and light
and medium crude oil);
b the development of the Orinoco Oil Belt Magna Reserves; 10
c the performance of certain investments for production growth in mature areas; 11
d the expansion of the Orinoco Oil Belt Production;
e the development of major projects in refineries; 12
f the development of the gas sector; 13 and
g the development of certain infrastructure projects. 14
II
REGULATION
The Venezuelan constitution establishes that mineral resources and hydrocarbons within
the country’s territory (including the territorial sea, exclusive economic zone and in the
continental shelf) belong to the state. 15 Therefore, title to hydrocarbons passes at the
wellhead to the corresponding operating company namely, PDVSA Petróleo SA (PDVSA’s
Venezuelan operating subsidiary) or the corresponding joint venture company. 16
10 Pursuant to PDVSA’s disclosed information, there are 1.36 billion barrels of original oil on site
(OOOS) in the Orinoco Oil Belt.
11 PDVSA intends to invest in mature areas with a view to achieve a crude oil production capacity
of 4,481 million barrels per day (‘mbpd’) by 2015. Such projected production for the period
leading up to 2015 would be divided as follows: 2,205 bpd from areas where PDVSA is the sole
operator, 555 mbpd from joint ventures producing light and medium oil and 970 mbpd from
LPG Liquefied Petroleum Gas operations. PDVSA intends to obtain the remaining 661 mbpd
of the 4,481 mbpd crude oil production capacity projected for 2015 from the expansion of
PDVSA’s operations in the Orinoco Oil Belt, which PDVSA plans to implement by developing
its extra-heavy crude oil reserves, including new upgrading facilities and pipelines to terminals.
12 PDVSA intends to expand its refining capacity from approximately 3.0 billion barrels per day
(‘mmbpd’) (1.3/1.7 mmbpd Venezuela/overseas capacity) to 3.2 mmbpd by 2015 (1.4/1.8
mmbpd Venezuela/overseas capacity).
13 PDVSA has plans to develop its onshore and offshore gas reserves with third-party participation
under the framework of the Gas Law.
14 PDVSA is implementing an infrastructure program focused on multiple projects with the
aim of securing the development of crude oil and gas reserves. This programme includes the
building of about 9.3 million barrels of oil storage capacity, three additional loading docks,
approximately 650 kilometres in oil pipelines, four new distribution facilities, the expansion of
existing gas pipelines and building new pipelines.
15 Article 12 of the Venezuelan Constitution.
16 The Constitution provides that for ‘reasons of economic and political sovereignty and national
strategy’ Venezuela shall retain all of PDVSA’s stock or any other entity to be incorporated to
handle the petroleum industry (Article 303 of the Hydrocarbons Law).
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