Is This The Beginning Of The End For Venezuela's Oil Sector?

[IsailedawayfromFR]

By Dave Forest - Jul 28, 2016, 9:50 AM CDT Maracaibo Basin

I discussed in Prime Meridians this past weekend a $1.4 billion lawsuit brought against Venezuela state energy firm PDVSA. With the major this week filing a motion to quash the suit, which claims it illegally transferred billions out of the U.S. in order to duck a settlement.

And news this week suggests that PDVSA may badly need the money. In fact, it may already be too late for the firm — and perhaps the wider Venezuelan oil sector.

Oilfield union officials in Venezuela’s Lake Maracaibo region leaked news to Platts that all is not well in the drilling sector here. With sources saying that major international operator Schlumberger has halted the majority of its operations.
Union leaders said that Schlumberger has shut down four of six rigs it was operating for offshore oil production in Lake Maracaibo. The reason being — a lack of payment for drilling services from PDVSA.

This shutdown looks to be somewhat of a “last straw” for PDVSA’s operations. After funding for drilling here appeared to come under stress earlier this year — when both Schlumberger and Halliburton said they were reducing rigs in Venezuela due to non-payment. At the same time, fellow drillers San Antonio and Petrex suspended a total of 36 rigs across Venezuela.
Related: Why Saudi Arabia Continues To Pump Crude At Record Levels

But PDVSA had appeared to be making headway — with Schlumberger saying in June it had reached an agreement with the oil major to keep six rigs operational in the Lake Maracaibo area.

The fact that most of those drills have now been idled suggests that PDVSA’s last-ditch contract efforts have failed. Possibly signalling a significant cliff ahead for drilling across Venezuela — which could foreshadow an accelerated decline in production.

Such a downturn would have big implications for a) global oil supply, b) Latin American oil trade (including the U.S. Gulf Coast), and c) Venezuela projects, national finances, and politics. Watch to see if PDVSA can find a way to get the idled rigs restarted — and for news on further drilling shutdowns in the country.

Here’s to running dry.
http://oilprice.com/Energy/Crude-Oil/Is-This-The-Beginning-Of-The-End-For-Venezuelas-Oil-Sector.html

What I find most ironic is that Venezuela, through its operations in the US via CITGO, cannot readily get its hands on monies here as it struggles back home.

[geronl]

The author doesn't seem to understand that the PDVSA is a government operation, not a "firm".

[thackney]

El Furrial: The Spectacular Decline of a Giant Oil Field
http://www.caracaschronicles.com/2016/07/28/el-furrial/
July 28, 2016

...Even in an area of hugely rich oil fields, El Furrial stands out. It’s the newest and largest field around, and it’s the most recent onshore non-Faja giant field to be discovered in Venezuela. At the time of its discovery in 1985-6 its proven reserves were about ~4 billion barrels. That’s enormous: at that time, that single field had oil reserves as big as Indonesia —an OPEC member, no less— and almost twice as much as all of Colombia. El Furrial has so much oil that PDVSA has an entire division dedicated to keeping this monster as the top producing field in Venezuela. It reached its peak in 1998 when it produced 453,000 b/d —a little less than Ecuador produces now. You get the picture: El Furrial is a monster.

But it’s not just about the quantity of oil that comes out of El Furrial, it’s about quality, too. The field produces light and medium crude. That’s key. As you know if you’ve read “The Shocking Potential of Natural Gas and Condensate” by a guy who goes by the nom-de-blogue Guevara de la Vega, Venezuela has been increasing its extra-heavy oil production and suffering acute shortages of lighter oil to mix it with.

lthough prolific and large, El Furrial’s geology is notoriously challenging. It’s very deep and asphaltene is a big problem. Asphaltene is something you don’t want with your oil because it plugs into the wellbore tubing and valves and makes a mess of your operation (a lawyer talking about reservoir engineering and well management, fin de mundo).

The asphaltene problems at El Furrial are notorious. So much so that every reservoir engineer in the world knows about them. El Furrial is in every oil field management textbook, the Society of Petroleum Engineers (SPE) has published a number of papers on it. Go to an oil field management/engineering reservoir conference and chances are you’ll run into someone presenting a paper on this topic.

The details get technical very fast, but the for-dummies version is that to keep oil flowing out of El Furrial, you need some sophisticated techniques collectively known as enhanced oil recovery (EOR) —you gotta keep the pressure up, you have to handle the asphaltenes, the associated water, the sand, a whole mess of details. First a water injection project was introduced in 1992. Later, a gas injection program called Planta de Inyección de Gas a Alta Presión El Furrial (IGF) came online in 1998. That last project was built, owned and operated by Wilpro El Furrial, a consortium of two American companies (Williams and Exterran).

Wilpro El Furrial managed to accommodate the revolution relatively effectively for a decade. Although PDVSA had owed it money (la mala costumbre of not honouring its debts is nothing new) relations were relatively stable until early 2009. That’s when the wheels came off, when the government decided it wanted to nationalise the oil services industry in one go, including of course, the gas injection projects....

...Sorting this out isn’t rocket science, but it will take time. PDVSA has to get rid of both non-core and complex operations. It has to pay decent wages, invest in its people and invest a lot more on R&D. When it comes to recovering INTEVEP, PDVSA’s R&D arm, pa’yer es tarde. The reform agenda is long. We need a more accountable and transparent industry. This is what I spend my days thinking about, so I’m going to be dealing with it in future posts.

Right now, the A.N. is discussing a bill to “de-nationalize” some of the oil service companies. The bill gives PDVSA more leeway to bring in subcontractors to take on tasks that were nationalized in 2009. I hope PDVSA is on board with this. There is nothing wrong with back-pedaling on a catastrophe.

Much more info at the link

[Sanguine]

Interesting.

[geronl]

socialismo

[IsailedawayfromFR]

There is nothing wrong with back-pedaling on a catastrophe.

Speaking as a reservoir engineer, here's some comments:

1. This field, while more complex than most, is not extraordinary by any understanding.  The reservoir engineering profession evolved in order to manage such type of reservoirs to optimize recoveries.

2. Proper management during a field's life can achieve some very robust recoveries of discovered oil.  Typical recoveries from reservoir possessing light crude can range from 40% to 60%.  Some specially-managed fields are far higher such as Texas's state treasure the East Texas Field which should achieve a remarkable 86% recovery of oil originally in place.

3. 'back-pedaling on a catastrophe' to obtain those reserves is almost impossible.  The damages done to complex reservoirs due to not managing them properly cannot be undone, Period.  Venezuela has permanently lost reserves due to its mismanagement.

[thackney]

3. 'back-pedaling on a catastrophe' to obtain those reserves is almost impossible.  The damages done to complex reservoirs due to not managing them properly cannot be undone, Period.  Venezuela has permanently lost reserves due to its mismanagement.

I read the back-pedal comment to reference specifically getting their government out of the oil-field service business to quite making the current situation worse.

[geronl]

They might backpedal a percentage or two of the barriers they have thrown up, but they'll create new ones. You can find run down buildings in Caracas (Carcass?) where nothing works and crime is rampant but they have all the forms and paperwork displayed on a wall and there are many.

[IsailedawayfromFR]

I read the back-pedal comment to reference specifically getting their government out of the oil-field service business to quite making the current situation worse.

I did too, but wanted to ensure that the non-technical folks are not left with the impression that one can forgive and forget on lost oil if the right oversight takes place.

the laws of physics just is not that forgiving to put the lost oil back.

[Suppressed]

I did too, but wanted to ensure that the non-technical folks are not left with the impression that one can forgive and forget on lost oil if the right oversight takes place.

the laws of physics just is not that forgiving to put the lost oil back.

Good luck.

Hydros can't get people to accept the concept that the damage they're doing by over pumping aquifers is permanent.  Everyone believes the laws of physics can just be waved away or ignored with money.

Has anyone done an energy-balance calculation to plot how much energy it costs to extract a barrel on average (i.e., net energy obtained), and then plotted that over time?  Obviously, that function will approach zero net at some point...I'm wondering how far out.

[dfwgator]

If only Venezuela had a "Pinochet."

[Smokin Joe]

El Furrial: The Spectacular Decline of a Giant Oil Field

Wilpro El Furrial managed to accommodate the revolution relatively effectively for a decade. Although PDVSA had owed it money (la mala costumbre of not honouring its debts is nothing new) relations were relatively stable until early 2009. That’s when the wheels came off, when the government decided it wanted to nationalise the oil services industry in one go, including of course, the gas injection projects....

There is a lesson there, for those who will heed it. I have seen numerous articles and comments over the past couple of decades which advocate government takeover (nationalization) of the US oil industry, some from alleged conservatives. This would bring disaster, not just to the industry, the oilfields themselves, but to the economy, too.

Once those reservoirs are damaged, the best that can be hoped for is that the damage is limited and some of that oil can be recovered by drilling new wells. Sometimes that won't work, either.

The wells can't just be turned on and off without suffering some serious damage if left for any length of time (another fallacy commonly seen).

Some things are best left to the professionals.

[IsailedawayfromFR]

There is a lesson there, for those who will heed it. I have seen numerous articles and comments over the past couple of decades which advocate government takeover (nationalization) of the US oil industry, some from alleged conservatives. This would bring disaster, not just to the industry, the oilfields themselves, but to the economy, too.

Once those reservoirs are damaged, the best that can be hoped for is that the damage is limited and some of that oil can be recovered by drilling new wells. Sometimes that won't work, either.

The wells can't just be turned on and off without suffering some serious damage if left for any length of time (another fallacy commonly seen).

Some things are best left to the professionals.

Some reservoirs have little effect is they are shutin for lengths of time.  In fact, some can improve if susceptible to gravity segregation, for example.

Others can be severely damaged permanently if left improperly, such as injection projects of steam or gas.

In my early days as a wee engineer I recall trying waterfloods in oil reservoirs blown down of gas caps, with no success at creating a bank.  Reservoir energy is gone, oil is viscous, and free gas makes a delightful pathway for water to find its way from injector to producer, bypassing oil.

[Smokin Joe]

Some reservoirs have little effect is they are shutin for lengths of time.  In fact, some can improve if susceptible to gravity segregation, for example.

Others can be severely damaged permanently if left improperly, such as injection projects of steam or gas.

In my early days as a wee engineer I recall trying waterfloods in oil reservoirs blown down of gas caps, with no success at creating a bank.  Reservoir energy is gone, oil is viscous, and free gas makes a delightful pathway for water to find its way from injector to producer, bypassing oil.

If a vertical well has been coned in (produced too rapidly so the stratified water in the porosity has been drawn up around the wellbore, in effect forming a cone that blocks oil from reaching the wellbore) An extended shut in period can allow the fluids in the formation to re-stratify and oil to reach the wellbore again.
It may be easier and quicker to cut a window in the production casing and drill a short radius horizontal well into the producing zone and bypass the cone-in and stay above the water, too, to take advantage of favorable market conditions and enhance recovery. That won't work all the time, as in some formations there will be wet (water producing) porosity layers above the oil producing layer that would have to be cut by the curve section of the lateral. I can think of a couple of things which might mediate or eliminate that problem, but there is always risk, and cutting the window and drilling the lateral would eliminate the option of waiting for the reservoir to re-stratify, as the vertical wellbore through the zone would have to be plugged.

(some phrases explained for the benefit of those not familiar with oilfield terms)

IIRC, the Russians ruined a fairly substantial oil field by producing the gas cap and leaving the oil in place.
I wonder if drilling for "shale gas" and using it for secondary recovery (to re-pressurize the reservoir) would work.

[IsailedawayfromFR]

If a vertical well has been coned in (produced too rapidly so the stratified water in the porosity has been drawn up around the wellbore, in effect forming a cone that blocks oil from reaching the wellbore) An extended shut in period can allow the fluids in the formation to re-stratify and oil to reach the wellbore again.
It may be easier and quicker to cut a window in the production casing and drill a short radius horizontal well into the producing zone and bypass the cone-in and stay above the water, too, to take advantage of favorable market conditions and enhance recovery. That won't work all the time, as in some formations there will be wet (water producing) porosity layers above the oil producing layer that would have to be cut by the curve section of the lateral. I can think of a couple of things which might mediate or eliminate that problem, but there is always risk, and cutting the window and drilling the lateral would eliminate the option of waiting for the reservoir to re-stratify, as the vertical wellbore through the zone would have to be plugged.

(some phrases explained for the benefit of those not familiar with oilfield terms)

IIRC, the Russians ruined a fairly substantial oil field by producing the gas cap and leaving the oil in place.
I wonder if drilling for "shale gas" and using it for secondary recovery (to re-pressurize the reservoir) would work.

Vertical coning of water or gas into a wellbore does not lose reserves as one must either wait for restabilization of fluids or redrill/redirect the wellbore to unaffected areas.

When you bring up drilling for shale gas for EOR, are you suggesting shale gas from one gas reservoir to repressure another, liquid-rich reservoir?  If you are, then by all means the answer is yes IF one can get effective injection which does not channel into producers.

The problem seen for unconventional reservoirs that require fraccing, and in fact for any and all reservoirs that are fracced or have natural fractures, is rapid movement of injected fluids via fractures from injector to producer. 

I suggest the best EOR for such reservoirs might be the single well injection wherein a producer undergoes injection of a gas(ideally CO2) for a period of time, allow the fractures filled with gas to soak into the reservoir for a time, then produce it back.

We are a long way from being able to get EOR very effective for tite reservoirs.  I heard one guy's lecture that suggested we need to begin drilling our Bakken wells parallel to max horizontal stress rather than perpendicular to it, in order to achieve the best areal sweep of injected fluids.

I doubt you or I would recommend doing that, as the producers would not be that great initially.

[Smokin Joe]

Vertical coning of water or gas into a wellbore does not lose reserves as one must either wait for restabilization of fluids or redrill/redirect the wellbore to unaffected areas.

When you bring up drilling for shale gas for EOR, are you suggesting shale gas from one gas reservoir to repressure another, liquid-rich reservoir?  If you are, then by all means the answer is yes IF one can get effective injection which does not channel into producers.

The problem seen for unconventional reservoirs that require fraccing, and in fact for any and all reservoirs that are fracced or have natural fractures, is rapid movement of injected fluids via fractures from injector to producer. 

I suggest the best EOR for such reservoirs might be the single well injection wherein a producer undergoes injection of a gas(ideally CO2) for a period of time, allow the fractures filled with gas to soak into the reservoir for a time, then produce it back.

We are a long way from being able to get EOR very effective for tite reservoirs.  I heard one guy's lecture that suggested we need to begin drilling our Bakken wells parallel to max horizontal stress rather than perpendicular to it, in order to achieve the best areal sweep of injected fluids.

I doubt you or I would recommend doing that, as the producers would not be that great initially.

It might be a good long term strategy, but everyone is focused on ROI in the shortest possible time (which is what really got the Bakken boom rolling--payout in 6-8 months, roll that back into the drilling budget, lather, rinse, repeat, at least on the early ElmCoulee wells). By now, most of the hot spot wells have already been cut across natural fracture trends, at least one to the lease, so the longest laterals would have to go at 90 degrees or so to them. Without serious lease spacing reorganization, (or the formation of production units) I don't see that happening. Some of the earlier 640 acre and 1280 acre spacing wells were cut down the E/W setback line, the N/S setback line, and then diagonally across the section. Some of these were coplanar laterals, some were drilled from windows in casing cut with removable whipstocks/packers, and it might be difficult to attribute production to any given leg. So even where that may have been done, the results are not likely available.

[IsailedawayfromFR]

So even where that may have been done, the results are not likely available.

That is exactly what I told the speaker during Q&A.

[Frank Cannon]

This is the least of their worries. Eating would be the first.

[Smokin Joe]

This is the least of their worries. Eating would be the first.

Yep. This was a big chunk of the economy, though, before the government got greedy.

[IsailedawayfromFR]

It is much worse there than we even know. 

70% in poverty.

720% inflation.

Now authorities taking away all guns from citizens to prevent revolt.

Sounds like a socialism dream, doesn't it?

http://www.washingtontimes.com/news/2016/aug/21/venezuela-faces-collapse-because-of-socialist-gove/

[Smokin Joe]

Another one. Another country living the dream. It doesn't work, it hasn't worked for any length of time, it can't work, and it will never work, no matter who is doing it. Won't people ever learn?

Recall, not so long ago when oil prices were up and gasoline was 4 dollars a gallon, how people right here in America were howling for the government to take over the oil companies?

It is a slippery slope, but the idea of a free lunch somewhere, somehow still resonates with people who think they can get something for nothing. That is only the song and dance a despot uses to gain power, after that, the suffering begins.

[thackney]

It is a slippery slope, but the idea of a free lunch somewhere, somehow still resonates with people who think they can get something for nothing. That is only the song and dance a despot uses to gain power, after that, the suffering begins.

Eventually every share the wealth program becomes a share the poverty program.

[Smokin Joe]

Eventually every share the wealth program becomes a share the poverty program.

If you had a change machine that returned 85 cents for every dollar you put in, would you use it?

Such is government.

In "sharing the wealth" there all those people who get paid to collect and distribute the wealth. They take a cut, sometimes a very large cut, right off the top. Every time the wealth goes through the machine to be redistributed, it is diminished. Only the size of the cut and the persistence and capability of the wealth generators will determine how many cycles can occur before the machine runs dry.

The more greedy the redistributors are (the larger their cut), the fewer cycles.

The less productive the wealth generators are, the fewer cycles.

As the former get more greedy, the less inclined the latter are to participate, especially if they have other options.
If the former takes over the operations of the latter, the result is inevitably an operation run by people who know nothing of performing the tasks that generated the wealth in the first place, and with inevitably disastrous outcomes.
It is a qualitatively predictable cycle, perhaps even a quantifiable one.
Once the tailspin begins, there is little chance of recovery under that management. Short of serious changes in how things are done, the whole country will suffer until the people change their government or it collapses.

[IsailedawayfromFR]

Once the tailspin begins, there is little chance of recovery under that management. Short of serious changes in how things are done, the whole country will suffer until the people change their government or it collapses.

Even if we had a conservative government finally in power to effect changes we need, guess what will happen?

They will get blamed for the unrealistically-high stock market bubble evaporating.

They will get blamed for the humongous increases in interest debt payments due to increased federal debt and inflation.

They will get blamed for unemployment as thousands of government employees are fired to stifle the hemorrhaging of federal expenditures.  The blue states living off the federal trough will be against them as their aid gets cut.

They will get blamed for the cuts in welfare, in Social Security, in Disability, in Medical payments and rises in premiums.

All of these are necessary to get back to fiscal realism in this country, but the short-term 'apparent' prosperity of the Obama years will be difficult politically to correct as the media will paint his replacement as the cause of the illness.

Education is the only way I see to keep this country's sanity.  And not bringing in and making US citizens of those who do not understand the American capital and political system and its ability to give freedoms to every person for the opportunity to prosper.

[IsailedawayfromFR]

Sometimes the media will also blame the earlier leader, if it fits their agenda, like this http://www.gopbriefingroom.com/index.php/topic,221672.msg1026261.html#msg1026261