Eni SpA and Venezuela President Hugo Chavez both announced in the last day that the gas field off Venezuela’s coast that Eni is exploring now appears to have 14 trillion cubic feet of gas. That is a lot of gas. In one gas field, close to the biggest oil refining complex in the Americas, close to a big fat pipeline, close to oilfields that need gas injection. By comparison, Bolivia, a major gas provider to Brazil and Argentina, has less than 10 trillion cubic feet of proved reserves. And these 14 are in one field. It is very unusual nowadays to find so much gas in one place.
From the statement:
Eni announces the successful results of the Perla 3 well … in the shallow water of the Gulf of Venezuela. This well confirms Perla as a world-class supergiant gas discovery, one of the most significant in recent years and the largest ever in Venezuela … the well flowed 68 million [cubic feet] per day of gas and 1,350 barrels of condensate per day … Eni and Repsol have already begun, together with PDVSA, to evaluate options for fast track development Perla through an early production phase of 300 million [cubic feet] per day, targeted to start-up in mid 2013. The early production phase could include utilization of the wells already successfully drilled and the installation of light offshore platforms linked, through a gas pipeline, to a Central Processing Facility located onshore.
Gas field development off Venezuela’s coast is usually delayed by:
-Low fixed domestic prices, with gas field operators getting around $1.50 per 10,000 cubic feet even when the same amount of gas in the U.S. was selling for almost 10 times as much.
-A government commitment to fulfill the domestic market before exporting
-Lousy project managment in offshore development and pipeline construction
-Unclear legal rights to the fields, with the government abruptly changing rules in many industries. It’s been years since the government promised a new gas law, and has never quite implemented the plan
-And these days, low international prices — it’s hard to justify a new plant to convert gas into liquid for export when the price of LNG is now low around the world, and there are more plants coming on stream all the time
Long story short, it’s groovy for Eni and Repsol that they found some gas. But Eni’s “target” of starting production in 2013 is a bit like me or you targeting a date this weekend with Roberta Mancini.