Drilling

Today, it’s no surprise that reducing energy costs is a top priority for companies. The uncertain economic and financial climate and the associated drop in revenue have actually increased the pressure to reduce expenditure on energy in order to prevent even greater erosion of margins. More specifically, comparatively high energy prices, increased environmental awareness globally and increasing “real” deregulation of the energy markets have given rise to increased interest in energy-saving opportunities.

While most operators are aware of the need to reduce energy costs, there are obstacles that keep companies from meeting projected energy goals.  On the one hand, firms often lack the appropriate IT systems and supporting business processes to measure their energy performance and produce actionable information. On the other, the responsibility for energy costs is often shared between several people within an organization, adding another layer of complexity to the mix.
In light of this, one approach that has proved to be effective in helping organizations reduce energy costs and take advantage of potential savings which have been largely unexploited is model-based energy management.
The key lies in technology solutions that utilize precise simulation models of the major process and utility systems.  These include all the peripheral production, costs, and commercial information analyzed in a consistent  way for, decision-makers.
This knowledge is useful for guiding long-term strategic decisions, concluding energy supply contracts, preparing budgets and investment plans, and optimizing the energy costs of ongoing operations on the basis of current demand, costs and plant availability.

In fact, Saudi Aramco is just one organization that has experienced a significant return to date with model-based energy management. The organization built an integrated planning model for several process facilities involved in their gas processing business. These simulations were designed to reduce time in the planning process.  Post-implementation, not only did they accomplish their time savings goal, they also achieved a 3%-5% reduction in energy use while increasing throughput 3%-8%.

This integrated approach to energy performance management consistently achieves significant savings in a number of critical areas:
•    Utilities production planning – An accurate utilities requirement prediction for production plants (demand forecasting), combined with current cost information on utilities supply sources, and allows production plans to be drawn up with optimized costs and back-up plans.

•    Optimum utilities execution – It is important to not only undertake optimized and realistic energy production planning; organizations also need to be in a position to implement the plan. Optimum execution is only possible when the plan is both communicated to the decision-makers involved and adapted to the constantly changing production conditions.

•    Utilities contract management – As a general rule, energy purchasing costs can be noticeably reduced if demand can be planned and conveyed to the energy supplier in advance (nominated). Frequently, these nominations are based on the experience and know-how of the respective employees, but rarely from all requirement data available from a model-based simulation. Such an energy management system can automatically produce an energy demand prediction according to production plans, thus drastically improving the quality of the nominations. Better accuracy reduces the chance of costly contractual penalties. For a producer who is using part of the production stream for fuel, this process does not reduce cost but increases revenue and the accuracy of sales nominations.

•    Improved utilities purchasing – With good information on demand, employees are in a better position to acquire fuel at the best prices and take advantage of opportunities.

•    Optimized investment decisions – A model-based understanding of the energy supply system allows maximum use of common utility systems and investments to be planned that account for optimum energy use and emissions overtime.

•    Optimized energy and emission trading – Site operators can react to fluctuations in the electricity market and emissions limitations. Model-based energy management allows operators to export power when power prices are high and comply with emissions limits. However, in order to minimize the risk traders need to know exactly how much electricity can be exported at that precise moment and at what cost. This information is available from a model-based energy management system.

Although a great deal has been invested in energy-saving programs over the last 30 years, it’s clear that there is still huge potential for savings through strategic energy and emissions management in order to achieve further longer-term cost reductions. In what ways does your organization leverage energy and emissions management? What do you believe is the best approach to capitalize on energy-based cost savings?

Mike Strathman, Director, Exploration & Production Group, AspenTech

The current situation in the GoM is tragic at the least. Once the flow of oil has been stopped, remediated onshore, and all affected industries are operating at normal capacity, there will be much more to report on from a technological viewpoint.

As for now, much of the reporting is derived from passion on both sides of the spectrum. Without doubt, this event will lead to sweeping changes in both the offshore drilling sector and our national sense of environmental stewardship.

The main point at this writing is not to identify spin from the left or right. More importantly, the goal should be to draw proper comparisons to the Deepwater Horizon. PBS’s McNeil-Lehrer News Hour hosted interviews from both environmental and industry proponents on its May 4 (Tuesday) broadcast. The discussion was moderated by Judy Woodruff and featured viewpoints from Kenneth Arnold, a Houston, Texas-based oil industry consultant, and Michael Gravitz who serves as the Oceans Advocate with Environment America.
Within the recent foray of reportage and pundit-related outrage, the PBS interview offered possibly some of the most rational viewpoints aired within the last several weeks. Although these speakers’ views are somewhat polarized where offshore drilling is concerned, they both emphasized the need to minimize the impact of the current spill.

At one point, Kravitz assured Woodruff that the current mode of using dispersants to break up oil before it reaches onshore was outdated technology saying, “We’re using a bunch of 1960s and ’70s technologies to try to clean up this spill, and none of the techniques individually are very effective.” Kravitz went on to imply that the dispersants were also toxic and often are derived from petroleum, which basically add to the problem.

Arnold replied, “He’s actually partially right and partially incorrect.” Arnold explained, “He’s talking about the 1960s dispersants, which used a hydrocarbon base as a solvent to disperse the surface active ingredients.” Arnold added that this process is outdated and that newer technology uses dispersants specified as safe by the Environmental Protection Agency (EPA).

Kravitz stated in his interview that this recent tragedy is a prime example of why the U.S. needs to get off of oil. “We need to find alternatives to oil,” Kravitz said. While this may be true, the possibility will not exist for at least the remainder of this century. Given our current technology, the world will run on a hydrocarbon diet for years to come. What are often referred to as “alternatives” such as solar and wind are actually better defined as “supplemental.” These technologies have to become scalable in the sense that profitability overrides cost, and this status will remain unchanged as long as fossil fuels remain in steady supply.

Now, the key point to make here is that almost every report compares the Deepwater Horizon spill to 1989’s Exxon Valdez. It is true that the size and impact of the most recent spill will shadow the 1989 event, but to set these spills side by side is much like comparing apples to oranges.

Namely, the Exxon Valdez occurred when a transport tanker ran aground – not from a well control incident. As a result, the U.S. set out on a rapid course of establishing moratoriums for most of the country’s offshore areas. As for timing, the Deepwater Horizon could not have happened at a worse time. With the Obama administration looking to expand the reach for many oil and gas exploration companies, that decision is now under further scrutiny.

From an industry perspective, the current spill is heightened first and foremost by the tragic loss of life in addition to the environmental impact and its associated financial concerns. Secondary to these, another tragedy will play out over the next two or three generations. The oil and gas industry has shown its capacity to learn from its mistakes.

Despite the fact that most major operators house teams of environmental scientists on their payrolls, many environmental activists are once again learning all they want to know about the offshore industry. With only two images (Exxon Valdez and Deepwater Horizon) industry detractors are willing to lock away available domestic resources without identifying the reality that the U.S. diet for fossil fuels will (by design) remain virtually unchanged for many years to come.

A look at actual facts and statistics from the 60-year history of offshore drilling will show that it far exceeds the safety of transporting resources into the U.S. from abroad. In addition, drilling in U.S. waters reduces both environmental and geopolitical risks. Yet, these facts are grossly overlooked for the sensational capacity of the most recent tragedy.

In closing his interview with Woodruff, the Houston-based Consultant Kenneth Arnold said the following:
“It’s been 41 years since the last major blowout in the United States where oil created a pollution problem onshore. That was 1969 in Santa Barbara.

“We have drilled tens of thousands of wells since then offshore. We have a pretty good safety record. This is a disaster. It is terrible. I get in airplanes all the time. No one can assure me that the airplane will not crash. But the benefits of air travel far outweigh the small risk that every now and then an airplane will crash.
“We learn from airplane crashes. We learn from blowouts. We will learn from this blowout, and the industry will be safer as a result of it.”

We are currently in a time of passionate responses both for and against the need for offshore drilling. The true perspective arises not from the Exxon Valdez to now, but spans 41 years from Santa Barbara in 1969 to now. With the lessons garnered in the months and years to come, offshore drilling will be improved and while no can assure the public that another blowout will not occur the benefit of producing domestic resources in U.S. waters will far outweigh the risk involved.

To view the full transcript of the Arnold/Gravitz interview visit http://www.pbs.org/newshour/bb/environment/jan-june10/oil_05-04.html

By Nina Rach

College and high school teams from the US, Canada, and Italy racked up amazing mileage using conventional and alternative fuels at Shell Eco-Marathon Americas, held in Houston, 26-28 March. Fifty different vehicles were built by 42 student teams, including 9 high schools and 29 universities. Shell sponsors this educational project to challenge students to design, build, and drive energy-efficient vehicles that compete in two categories: “Prototype” and “Urban Concept.” Success is measured by fuel-efficiency – the vehicles that travel the furthest using the least amount of fuel.

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“Prototype” vehicles focus on maximizing fuel efficiency through innovative design elements, and 40 were registered, including 29 with combustion engines, 5 hydrogen/fuel cell, 1 LPG, 2 diesel, 2 solar, and 1 ethanol-fueled vehicle.

“Urban Concept” vehicles attempt to meet the needs of today’s drivers with a “roadworthy” and fuel-efficient vehicle. Ten of these were registered, including 6 with combustion engines, 1 hydrogen/fuel cell, 2 diesel, and 1 solar-powered vehicle.

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Shell stressed safety throughout the event, with daily briefings for staff and competitors, designated safety professionals, and various requirements: vehicles were required to pass a safety inspection that included braking capability on inclined planes, drivers were required to wear flame-retardant racing suits, safety harnesses and helmets, pass a driving knowledge test, and demonstrate that they could exit the vehicle, unassisted, within 20 sec, before they were were allowed to access the circuit.

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Prototype winners

The Alerion Supermileage Team from Quebec’s Universitie Laval brought its NTF 4.0 combustion engine car to Texas for the weekend competition, and completed ten ultra-efficient laps in a second run on Sunday. After demonstrating an outstanding 2,487.5 miles/gal (1,057.5 km/l), the team catapulted to first place in the Prototype category and took home a US $5,000 grand prize. [The Laval team also won last year in the "Prototype" category, with 2,757.1 miles/gal (1,172.2 km/l).]

Among the fuel cell/hydrogen engines entrants, the Cicero North Syracuse High School team from Cicero, NY achieved 780.9 mpg (331.99 km/l) in its Clean Green Machine vehicle.
The Purdue University Solar Racing Team took first place with its solar vehicle, Pulsar, which achieved 4,548 mpg (1933.5 km/l).

Urban Concept winners

In the “Urban Concept” category, the Supermileage team from Mater Dei High School in Evansville, Indiana took the grand prize for the second year in a row by achieving 437.2 mpg (185.87 km/l) with their combustion-engine vehicle, George. [This team also set a Prototype record in 2008 with a vehicle that achieved 2,843 mpg (1,208 km/l)]

Special awards:

People’s Choice: 1^st-Purdue University, Pulsar; 2^nd-Granite Falls High School, Iron Maiden; 3^rd-Granite Falls HS, Phillipe’s Bulldozer. [The Granite Falls ShopGirls team is also the first all-girl team to compete in any of the Shell Eco-Marathons]

Eco-Design: University of California, Los Angeles, Frankenstein.

Safety: Monrovia High School, Benton High School and Granite Falls High School.
Technical Innovation: Purdue University, carbon-fiber construction technique.

Design: Louisiana Tech University.
Communications: Purdue University.

Best Team Spirit: Louisiana Tech University.
Perseverance in the Face of Adversity: University of Missouri.

The Shell Eco-Marathon Americas energy challenge will return to Houston in 2011.

Chesapeake CEO Aubrey K. McClendon and Anadarko CEO James T. Hackett are two among several energy executives who help direct two relatively new industry organizations promoting the development of natural gas.

ANGA
Chesapeake Energy Corp., Anadarko Petroleum Corp., and 23 other US natural gas producers formed the American Natural Gas Alliance (ANGA) in March. ANGA members produce about 9 Tcf of natural gas/year, representing 40% of the natural gas supply in the US. According to CommunityTies (Summer 2009), a quarterly publication from Chesapeake, the company has pledged US $8 million/year toward the organization’s $100 million goal of promoting the numerous benefits of natural gas. Anadarko CEO Hackett was named as chairman of ANGA on March 15. 

ACSF
This new initiative follows McClendon’s successful leadership in promoting natural gas through the American Clean Skies Foundation (ACSF), a Washington, DC-based think tank that promotes greater use of natural gas. ACSF was launched in 2007 “to advance America’s energy independence, and a cleaner, low-carbon environment through expanded use of natural gas and renewables.”

Last week, Alberta’s provincial government announced they would repeal the royalty increases levied on oil and natural gas produced within the province. The announcement coincided with my arrival in Calgary (not that the two are in any way related).

Effective January 1, 2011, the top royalty rate on natural gas will drop to 36% from 50%, and highest rate for non-oil sands crude will drop to 40% from 50%. The bottom rate for both natural gas and crude oil will remain 5%.

According to the Globe and Mail, cutting the royalties will cost the province nearly $200 million in missed royalties between now and 2013, but the royalty rollback is expected to increase drilling activity, leading to more corporate tax revenue, and add 13,000 jobs/year.

In 2008, Alberta Premier Ed Stelmach promoted the royalty increase, saying that Albertan’s deserved a “fair share” of the oil profits being reaped in the province, and the new rates became effective on Jan. 1, 2009. But the increase was particularly ill-timed, coinciding with the global financial crisis and plummeting petroleum prices. Rig usage dropped and the rapid decline in drilling triggered layoffs across the industry.

In particular, rig crews were idled in Alberta, as scaled-back investment shifted to opportunities in other provinces. The effects in Alberta were apparently quite painful, as 30% of the province’s economy is rooted in the petroleum sector.

The Petroleum Services Association of Canada (PSAC) updated their 2010 drilling forecast on Jan. 27 , forecasting a new total of 9,000 wells to be drilled across the country, up 12% (1,000 wells) from PSAC’s original forecast released in early November 2009. All of the additional wells in this new forecast are expected in Alberta, where PSAC now estimates 6,095 wells will be drilled. This represents an expected 4% increase over 2009 drilling in the province.

Roger Soucy, president of PSAC, said “Improved prices led to a spurt in drilling activity in December 2009 and we expect stronger pricing to continue to impact drilling levels as we move through 2010.”

Let us not forget that most of the petroleum used in the US comes from Canada, and that the US relies heavily on production from Canada’s vast oil sands. The recently announced royalty rate changes do not pertain to oil sands development.

Very little commentary has appeared on the effects of the recent Chilean earthquake on the country’s oil and gas industry. The magnitude 8.8 (moment magnitude scale) earthquake occurred at 3:34 am on Saturday, February 27, off the coast of the Maule region, central Chile. The epicenter was 330 km southwest of the capital, Santiago. It was the largest quake in Chile in 50 years (since the 1960 Valdivia earthquake) and set off a tsunami that battered the Chilean coast and resulted in hundreds of deaths and substantial damage to property and infrastructure.

No warning?

The Chilean hydrographic and oceanographic service (SHOA), failed to send out a nationwide tsunami alert following the earthquake. SHOA is a branch of the Chilean Navy (“Armada de Chile”). Immediately following the tsunami, Chile’s defense minister, Francisco Vidal Salinas, said that the Chilean Navy had made a mistake by not immediately issuing a tsunami warning, which could have saved lives. The head of the service, Commander Mariano Rojas, was fired on March 5. According to the Santiago Times, Commander Rojas will be replaced by Commander Patricio Carrasco.

In a national catastrophe, there is seldom a single factor upon which all blame can rest. Was Rojas really the single point of failure? Perhaps the uncoordinated response by SHOA can be tied to the story of a ship launched a few hours too early – the Cape Horn.

Naval officials preoccupied?
In the days preceding the earthquake and subsequent, devastating tsunamis, Chile hosted the COPONA 2010 – Congreso Panamerican do Poder Naval  (Pan American Naval Power Conference) in Santiago. Some conference attendees participated in a post-conference site visit to the port city of Talcahuano and its naval dockyard (ASMAR) to witness the planned launch of the Chilean Navy’s newest oceanographic vessel: AGS 61 Cabo de Hornos (Cape Horn). The launching ceremony was scheduled for 1:30 pm Saturday and was to be attended by the President of the Republic of Chile, Michelle Bachelet. According to the IQPC:

The oceanographic and fisheries vessel (AGS) is a state-of-the-art survey vessel built to serve Chile’s needs to develop and survey new resources while monitoring existing ones. Her design, compliant with ICES Cooperative Research Report 209 relating to underwater noise reduction, is built for worldwide geologic, fishery resource survey and oceanographic research. Cabo de Hornos is the latest oceanographic research vessel built under the MEDUSA project – a long-standing desire of Chile’s oceanographic and fishing community to be able to conduct enhanced marine studies, gain a greater knowledge of Chilean seas and gather invaluable information for the best possible management of Chile’s natural resources.

Talcahuano engulfed
The Cabo de Hornos was built to replace the Chilean Navy’s Vidal Gormaz, but the tsunami that engulfed the port of Talcahuano swept the new ship from its rails and left it lodged behind a crane. The ASMAR shipyard was heavily damaged and authorities estimated it will take five years to rebuild.
The European Union Satellite Centre (EUSC) issued a report on March 5 diagramming damage to the shipyard, which includes a broken pier, at least five large ships that were tossed and grounded, and other damaged vessels. Video footage from Mega Noticias, in which Commander Rojas talks with commentator Rafael Cavada, shows floating cranes and at least one floating drydock tossed up by the tsunami.
On March 9, Public Works Minister Sergio Bitar said that Chile has complete connectivity by land, air and sea, except for the port of Talcahuano. Many of the repairs to Chle’s roads, bridges, airports, dams, canals, coastlines could be done this year, but the port repairs will take longer.

Petroleum sector
Chile’s Magallanes basin has crude reserves of about 150 mbo in a few dozen fields, but production is declining. State-owned Empresa Nacional del Petroleo (ENAP) controls Chile’s oil sector and operates three refineries with 226,800 b/d of crude oil refining capacity.
On March 3, Reuters reported that two of ENAP’s refineries were shut as a result of the earthquake: the BioBio refinery north of Conception and the Aconcagua refinery near Santiago.
Another earthquake struck offshore Bio-Bio on March 5, magnitude 6.6 (USGS details).  ENAP later declared force majeure on a crude shipment from Ecuador’s Petroecuador due to refinery damage.

Sonacol operates Chile’s domestic oil transport network, with 290 miles of domestic crude oil and product pipelines and a fleet of oil tankers. Chile imports crude oil predominantly from Argentina, Brazil, Angola, and Nigeria, partly through two crude oil import pipelines: the 270-mile, 115,000-bbl/d Trasandino pipeline, supplying crude from Argentina to southern Chile, and the Arica-Sica pipeline, crossing into far northern Chile from Bolivia.

Chile has about 3.5 Tcf proven natural gas reserves and does not produce enough to cover domestic consumption. There are four main gas import pipelines, two in the north, one serving Santiago, and another farther south, paralleling the Talcahuan-Nequen crude oil pipeline. Reuters reported that “Argentina will double its daily supply of natural gas to Chile” and that the earthquake has not damaged pipelines between the two countries.

The Quintero Bay LNG receiving and regasification terminal operated by BG Group, 155 km northwest of Santiago, was not damaged. The single-train Mejillones LNG regasification project in Antofagasta, northern Chile, was also unaffected.

Spanish word of the day: “terremoto” (earthquake)

Postscript, 11 March 2010, 10:00am CST - Chile experienced two more large earthquakes this morning, magnitude 6.9, with epicenter in Libertador O-Higgins. Details from USGS here.

The American Petroleum Institute plans to deepen its grass-roots campaigning, with a new manager to “coordinate the association’s efforts to develop, mobilize and sustain a political infrastructure of individuals, groups, and coalitions to advance priority advocacy issues with elected officials.”

The organization announced on March 1 that it has hired Deryck Spooner away from the Nature Conservancy, to serve as API’s Senior Director for External Mobilization.  Spooner is based in Washington, DC, and previously managed climate change advocacy outreach work at the Nature Conservancy.

Both organizations lobby different agendas, and Spooner’s switching allegiances seems like a significant change in career path.  API seeks to educate public officials about the critical role of oil and gas in our economy, but has had less recognizable impact on educating the public.

A native of Trinidad and Tobago, Spooner, 42, is close to completing a Ph.D. in political science at Howard University. 

“Deryck has extensive experience in the strategic and tactical aspects of both political and issue campaigns,” said API President and CEO Jack Gerard. “He’s a veteran of coalition building and grassroots mobilization and will play a vital role in our advocacy work at a critically important moment for US energy policy.  We’re extremely fortunate to have him on our team.”

“The position at API is a tremendous opportunity and challenge,” Spooner said.  “My father was a petroleum engineer in the oil business.  I spent part of my childhood on the rigs.  I know how important oil and natural gas are today and will be for the nation’s energy future even as the use of alternative energy grows.  I’m determined to work hard to help ensure the nation’s energy policies reflect this reality”.

[I won't quibble with his familiarity with the petroleum business, but how many operators allow kids on drilling rigs? Was he playing around the machinery?]

Writing for the New York Times blog, Green Inc., Annie C. Mulkern  quoted API spokeswoman Cathy Landry, “Jack’s vision is to mobilize the 9.2 million people whose jobs rely on the oil and gas industry. We do plan to step that up.”

Mulkern interviewed Spooner, who said, “I have worked for vastly different organizations throughout my career. The bottom line is it’s all about advocacy, that’s what I’m passionate about. Mobilizing and organizing people to influence the public process and public policy is what I truly love to do.”

“At the end of the day, I don’t necessarily believe that the views of [the Nature Conservancy] and API are incompatible.” API members use technology “to ensure that the places that they drill are not impacted,” Spooner said, while the Nature Conservancy uses a scientific approach in deciding where to protect land and water. API members, he said, “don’t just want to drill anywhere for drilling’s sake. There’s a lot of science going into where they drill.”

Lots of science indeed.

The recent news of proposed acquisitions and 2010 budgets contain some large, large numbers. We’re becoming accustomed to tens of billions of dollars in planned transaction values.

This week, we read that Schlumberger Ltd. now plans to acquire Smith International Inc. for US $11 billion ($11,000,000,000), and India’s Reliance Industries Ltd. raised its offer for LyondellBasell Industries AF to $14.5 billion ($14,500,000,000). Barclays Capital said in December that oil and gas industry spending will rise 11% this year to $439 billion ($439,000,000,000), anchored by 2010 budgets at Royal Dutch Shell ($28 billion), Chevron Corp. ($21.6 billion), BP PLC ($20 billion), and Total SA ($18 billion).

In terms of market capitalization, ExxonMobil Corp. leads the major integrated oil & gas companies with $309.1 billion, followed by PetroChina Co. Ltd. ($203.5 billion), BP ($169.6 billion), Shell ($164 billion), Chevron ($146.4 billion), and Total ($129.6 billion).

Among the oilfield equipment and services companies, Schlumberger leads with $73.7 billion market capitalization, followed by Halliburton Co. ($28 billion), National Oilwell Varco Inc. ($18.6 billion), Baker Hughes ($15 billion), and Weatherford International Ltd. ($12.3 billion).

However, China’s CNOOC Ltd., leads the industry with $7.013 trillion market capitalization. CNOOC raised its 2010 capital budget to $7.93 billion, planning to spend 29.5% more than it did in 2009, but it’s still barely 25% of front-runner Shell’s 2010 budget.

These long strings of zeros represent sums that dwarf the personal budgets of almost all workers by a vast margin. Do we appreciate and will the next generation entering the workforce properly comprehend numbers at this scale? Many high schools offer classes in basic economic theory, business priniciples, and perhaps personal budgeting, but are today’s 18-year olds equipped to understand-and vote-on issues* involving trillions?

*According to the US national debt clock, the US deficit stands at $12 trillion and has increased an average of $3.87 billion daily since Sept. 28, 2007.

After withdrawing its ambassador in 2005, the United States has sent an envoy to Syria and plans to post an ambassador. Under-Secretary of State William Burns met with Syrian President Bashar al-Assad in Damascus this week, after Syria approved the nomination of career diplomat Robert Ford as the new US ambassador.

What does this mean for the oil industry?

Ford currently serves as the deputy chief of mission in Baghdad, served as ambassador to Algeria 2006-08, and deputy chief of mission in Bahrain 2001-04. He should be familiar with the politics of oil in northern Africa and Middle East. Iraq was a founding member of the Organization of the Petroleum Exporting Countries (OPEC) in 1960, and Algeria joined OPEC in 1969. Syria is a prospective member.

According to the New York Times today, analysts say Washington hopes to pull Syria away from Iran.

Syroil 2010, the 7th Syrian International Oil & Gas Exhibition, is scheduled for April 5-8, sponsored by Syria Shell Petroleum Development BV, Total E&P Syrie, Petro-Canada, Sinopec, CNPC, SSKOC, Schlumberger, and others.

According to an Arab economic report issued in January 2008, Syria’s oil reserves rank 11th in the Arab world, tied with Yemen, at 3  billion bbl. Syria’s gas reserves were also ranked 11th, at 310 billion cu m.

In October 2009, Syria and Venezuela signed trade, agriculture, and energy cooperation agreements. Industry players from Canada, China, and the Netherlands are developing relations and projects- and perhaps the US is finally following suit.

An editorial in today’s Miami Herald lambasts Venezuelan President Hugo Chávez for trying to prevent collapse of the country’s strained infrastructure with energy advisors from Cuba (”Venezuela heads toward disaster,” 9 Feb. 2010).

Venezuela is rich in natural resources but petroleum production has plummeted in the last decade under Mr. Chavez’ leadership. According to the US Energy Information Administration (EIA) figures from 2007, Venezuela had the second largest proven oil reserves in the western hemisphere-99.4 billion bbl-after Canada  (178.1 billion bbl).

In 2007, the country had net oil exports of 1.9 million barrels per day (bbl/d), seventh-largest in the world and the largest in the Western Hemisphere…[but] crude oil production in the country has fallen, mostly due to natural declines at existing oil fields.

Industry experts estimate that Petroleos de Venezuela S.A. (PdVSA), the country’s state-run oil and natural gas company, “must spend [US] $3 billion each year to maintain production levels at existing fields, as many of these fields suffer annual decline rates of at least 25%”  (EIA). But PdVSA’s ability to reinvest in infrastructure and field maintenance is stymied by the increasing demands placed upon its finances by the government [not unlike Mexico].

The Miami Herald author writes, “The problem with PDVSA, the oil company, as Venezuelans well know, is that Mr. Chávez turned it into a sinecure for political cronies, destroying its once admirable efficiency and productive value. Only by putting the experts back in charge can it hope to recover.” 

Mr. Chávez has cultivated a close relationship with Cuba since coming to power, and has increased shipments of crude oil in exchange for the services of Cuba’s well-trained doctors (highly regarded by many in the US) and other advisors. Now Chávez has invited Cuban advisors to help solve Venezuela’s energy crisis. Presumably this includes electricity, power generation, and oil production. (”Chavez turns to Cubans for help with energy crisis,” 3 Feb 2010) 

I applaud Cuba’s movement to explore its offshore resources but it is still a fledgling effort, and coupled with the island country’s own electricity crisis and continuing blackouts, does not constitute the depth of experience necessary to plan or critique energy policies in Venezuela. Fixing the South American country’s large and well-established petroleum industry requires more expertise than the Cubans are likely to deliver.

The editorial also notes that Mr. Chávez has “spent $6 billion to buy weapons from Russia, and provided covert support to the terrorist Revolutionary Armed Forces of Colombia (FARC).”

Neighboring Colombia has a long history of oil exploration, recently improving and attracting considerable foreign investment. The country is reportedly safer for travel and business than it has been in decades. If the allegations of Venezuela supporting the FARC are true, one wonders why President Chávez would deliberately antagonize and attempt to destabilize its neighbor to the west. Surely Colombia could provide more knowledgable technical industry advisors than Cuba?