Spotlight on Venezuela

Spotlight on Venezuela

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The dawn of Venezuela’s oil industry dates back to the town of Guanoco, in the state of Sucre in eastern Venezuela. Lake Guanoco, the largest asphalt lake in the world, is located in the vicinity of this town. Also known as Lake Bermudez, this liquid was used to caulk the boats of the natives.

Lake Guanoco has an area of 4.2 square kilometers. The asphalt lake La Brea (Pitch Lake) in neighboring Trinidad is located at the same latitude as Lake Guanoco.

In 1883, Horacio R. Hamilton and Jorge A. Phillips obtained the concession to commercialize asphalt and petroleum. Two years later, they ceded the concession to the firm, New York & Bermúdez, a subsidiary of General Asphalt.

On February 28, 1907, during the presidency of Cipriano Castro, Antonio Aranguren was granted a concession to develop oil and asphalt deposits in the districts of Bolívar and Maracaibo in the state of Zulia for 50 years. On May 23, 1913, Aranguren founded the Venezuelan Oil Concessions, which years later would be acquired by the Royal Dutch Company.

On August 15, 1913, the aforementioned New York & Bermudez drilled and completed the Bababui-1 well, which produced a very viscous crude oil. Discouraged, New York & Bermudez then assigned its rights to the Royal Dutch Shell Company.   

In January 1914, the Caribbean Petroleum Company began drilling the MG-1 in Cerro La Estella in the district of Mene Grande, Zulia State. The well was called Zumaque-1 because the summit of Cerro La Estrella was covered with bushes called zumaque. On July 31st of that year, the well was completed. With this, President Gibran Rojas inaugurated the birth of the Venezuelan oil industry. The well sprouted with production of 264 bbl/day, API 18 degrees.

In March 1920, Creole Petroleum Corporation was founded and the following year Creole and Standard Oil of Venezuela (SOV) began operations.

Spotlight on Venezuela

The verification of reserves made by the Shell Group, and the projections of Creole and Standard Oil of Venezuela of these reserves in the waters of Lake Maracaibo, was an invitation for many transnational companies such as Gulf, Chevron and others to come to Venezuela to begin exploration and production.

In San Timoteo, a town on the shores of Lake Maracaibo, the San Lorenzo Refinery was built to refine oil from the Mene Grande field. From Mene Grande, traveling along the shore of Lake Maracaibo, to the northwest is La Rosa, a hamlet of the city of Cabimas. It was here on December 14, 1922, that the Barroso-2 well burst and flowed for nine days, discharging 100,000 bbl/day. The explosion occurred at 4:30 in the morning, waking a population that felt tremors from the ground and the rumble that shook Cabimas.

Barroso 2 unveiled the potential of oil fields in the Venezuelan subsoil and opened the cycle of the Venezuelan oil industry. Drilled by Venezuelan Oil Concessions (VOC), a subsidiary of Shell, the company obtained the exploitation and production concessions on land of the entire eastern shore of the lake. In a short time, the cities of Cabimas, Lagunillas, Bachaquero and Mene Grande attracted populations from other regions willing to work for better wages.

In April 1923, Lago Petroleen Corporation was formed in Cabmas, Zulia State, to operate on Lake Maracaibo in the Bolivar coastal field, one of the largest reservoirs in the world.

From the beginning of oil activity in Venezuela in 1914 until its nationalization in 1976 during the government of President Carlos Andrés Pérez, thousands of wells were drilled. On the eastern shore of the lake, Shell drilled and completed thousands of land wells with mechanical pumping. A number of deeper wells were also drilled in the lake, with lighter and lighter crude oils. The gas-assisted lifting (gas lifi) method was implemented.

In 1970, Venezuela produced 3.7 million bbl/day, and was a reliable exporter, even during periods of crisis such as World War II and the Yom Kippur War in 1973.

Venezuela’s oil industry, which includes Petróleos de Venezuela, S.A. (PDVSA), the state-owned oil and natural gas company, has had its ups and downs. In 1998, it had a rebound, producing 3.3 million bbl. Since then, production has fallen to historic lows, especially in recent years, when it was surpassed by neighboring Brazil as South America’s top oil producer.

It is important to note that Venezuela has enough reserves to return to being a global producer and exporter. It has the necessary infrastructure, such as refineries, storage facilities and shipping ports, already in place. The Venezuelan oil industry can compete by offering the best price per barrel produced. Reactivating the country’s thousands of wells does not require the investment or cost of drilling new wells.

It is clear that consideration should be given to the development of the Orinoco oil belt and the north eastern Atlantic coast, which contains considerable gas reserves. 

Reports that Chevron plans to add 65,000 bbl/day by the end of next year through its new drilling campaign are a bright spot on the horizon.

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Carlos Espinoza Gala holds a Bachelor of Science from the University of Texas – Austin. He has worked as a well completions consultant for Welex, a Halliburton company; Baker Hughes and Camco, Inc.

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