Rosneft Eyes Venezuela Condensate, LNG Exports

Russia´s state-controlled Rosneft is eyeing possible LNG and condensate exports from Venezuela under a preliminary agreement that deepens the company´s oil and gas presence in the South American country.

Under the new Heads of Agreement that Rosneft said elaborates on a memorandum signed in St Petersburg in June 2015, Rosneft would acquire a 50pc stake in the Mariscal Sucre offshore gas project with Venezuelan state-owned PdV. The new agreement "provides that the parties shall move to the practical stage and perform the in-depth feasibility study on the project," Rosneft said in a brief note issued yesterday.

The PdV-Rosneft project would produce 25mn m3/d (882.5mn ft3/d) of gas from the Patao and Mejillones gas fields and "potentially" the Rio Caribe condensate field that make up the bulk of the Mariscal Sucre complex, "providing the potential to develop the world-class export-oriented pipeline or LNG project," Rosneft said.

The preliminary gas agreement appears to hinge on PdV´s development of the 3.92 trillion ft3 Dragon field, which the cash-strapped company has been struggling to tap on its own since 2010. Dragon is one of four offshore deposits that make up the shallow water Mariscal Sucre complex located 25mi (40km) north of the Paria peninsula in eastern Venezuela at depths of 328-497 ft (100-130m).

Under PdV´s initial plan, all of Mariscal Sucre's gas and condensate production would be transported by sub-sea pipeline to processing facilities at the Cigma industrial gas and petrochemicals complex that PdV is developing near Guiria in Sucre state.

Although Rosneft and PdV omit development details and the investment commitment for Mariscal Sucre, a development proposal presented by Rosneft to PdV in June 2015 sheds light on a likely outline. PdV would complete the 600mn ft3/d development of Dragon by 2018, but Rosneft would operate a new venture to develop the Patao, Mejillones and Rio Caribe fields that make up the rest of Mariscal Sucre.

Patao holds 5.14 trillion ft3 of dry gas reserves, and adjacent Mejillones holds 2.85 trillion ft3 of wet gas, the energy ministry said. Rio Caribe holds 2.15 trillion ft3 of gas condensate.

The 2015 presentation calls for drilling eight dry-tree wells to produce 600mn ft3/d of dry gas from Patao, and seven dry-tree wells to produce 300mn ft3/d of wet gas from Mejillones. Another eight dry-tree wells in Rio Caribe would produce up to 29,000 b/d of condensate.

Under Rosneft's proposal, gas produced from Patao and Mejillones would be collected at wellhead platforms at each field, for transport through a 14mi subsea pipeline to a central processing platform at Dragon to strip out condensate that would be sent to nearby floating production, storage and offloading (FPSO) vessels. The condensate would be exported, and the dry gas would be shipped to Cigma. Additional interconnected processing platforms at Mejillones and Rio Caribe would position the venture for expanded production and possible LNG exports.

Rosneft has established the export provision as a condition for its participation, an energy ministry official with direct knowledge of the negotiations tells Argus.

Venezuela has aspired to export LNG since the 1980s. In the early 1990s, ExxonMobil, Shell and Mitsubishi proposed developing the Cristobal Colon LNG project, the original iteration of Mariscal Sucre. Cristobal Colon was aborted as part of a deep-seated political backlash which went on to shape contemporary state-oriented Venezuelan energy policies.

Rosneft separately agreed to pay $500mn to PdV to increase its stake in the 130,000 b/d PetroMonagas integrated extra-heavy crude venture to 40pc from an existing 16.67pc, according to statements issued simultaneously in Caracas and Moscow.

The Venezuelan company remains primarily a crude producer, although offshore gas production got underway for the first time last year when Spain´s Repsol and Italy´s Eni launched the 7 trillion ft3 Perla field in the Gulf of Venezuela. All of that production currently estimated at around 500mn ft3/d is sold to PdV, which has so far not farmed into the venture with a minority stake, as Venezuela´s gas law allows.

PdV has been courting foreign investors for years to tap Venezuela´s considerable oil and gas reserves, but substantial upfront costs, PdV´s inability to foot its share of investment and a volatile political climate have deterred large-scale commitments.

Rosneft's agreement to expand its stake in PetroMonagas "reaffirms" the Russian company's commitment to expanding its ventures with PdV despite Venezuela's current economic and political "difficulties," an energy ministry official said.

Source: Argus Media
Date: Feb 21, 2016