The Energy Regulation and Markets Review - Stikeman Elliott

Venezuela
capacity. Such use is subject to contractual arrangements as the parties may agree. If the
parties cannot agree on conditions, the MEP will establish them.
Pursuant to the Gas Law, this open-access obligation does not extend to producers,
traders or major end users; however, the Gas Law does not prohibit the storage,
transportation and distribution companies from buying and selling gas in addition to
providing service. Therefore, producers, gas traders and major users have no explicit right
to open access.
IV
ENERGY MARKETS
The gas industry in Venezuela directly depends on the cycles of oil business, given that
more than 90 per cent of Venezuela’s gas reserves are associated with crude. 35 The purpose
of the Gas Law was to attempt to modify the structure of the Venezuelan gas market,
but the fact that the varous stages are in the hands of affiliate companies of PDVSA
influenced the enforcement of the law, and hence the market has not yet changed as
intended.
In effect, the government is involved in the exploration and production business
through a vertically integrated company (PDVSA Gas). This company engages in gas
exploration and production activity and the processing of gas production, as well as the
transportation and marketing of gas in the domestic market. PDVSA Gas processes gas
produced by the eastern and western exploration and production divisions of PDVSA,
receiving all the remaining gas after consumption for PDVSA’s operations, for transport
and marketing in the domestic market. PDVSA’s wholly owned subsidiary CVP manages
offshore natural gas projects.
The gas industry is currently integrated in a vertical structure, with the exception
of certain participants, which include:
a producers (PDVSA E&P, Ypergas, Copa Macoya and Barrancas);
b transportation (PDVSA Gas);
c local distribution companies (PDVSA Gas Comunal, Domegas, Sagas, Tigasco);
and
d end users (industrial, power, iron and steel, and residential.
The Eastern Basin is the largest producer region in Venezuela, where the gas production
is mainly concentrated. For a long time, the largest gas producer was the Maracaibo
Basin in the west of the country, but many of its reservoirs have been depleted. As a
result, there is a critical lack of gas in the western region, reaching such levels that imports
from Colombia have provided an important share of the gas supply to these consumers,
mainly through the TransCaribbean pipeline from Puerto Ballena–Bajo Grande.
35 Venezuela produced in 2006 only 2.6 trillion cubic feet (‘TCF’), of which the oil industry
consumed 71.1 per cent of Venezuela’s natural gas production, with the largest share of that
consumption for injection to enhanced oil recovery (1.1 TCF equivalent to 60 per cent of that
consumption. ‘Venezuela natural gas market: a project for its growing’ (Marco González).
353