Venezuela: We're #1 in Oil Reserves!

Venezuela now claims that it has the world's largest oil reserves at 316B barrels, topping those of Saudi Arabia at 262B. Or at least that's Hugo Chavez's claim as trumpeted on the state-owned oil firm PDVSA's website. This claim relies on heavy oil deposits being deemed recoverable in its Orinoco River valley--an area immortalized in Enya's hit song "Orinoco Flow (Sail Away)." The problem has always been that the oil there is of a heavy (high specific gravity) and sour (sulphur-filled) variety that is more difficult to refine than Saudi Arabia's typically lighter grades. If you go by quality and not quantity, Saudi Arabia has it all over Venezuela.The standard measure of specific gravity is the American Petroleum Institute's scale. Light crude oil has a gravity higher than 31.1° API; medium oil between 31.1° API and 22.3° API; heavy oil between 22.2° API and 10.0° API; and extra-heavy oil below 10.0° API. Most of Venezuela's crude is of the latter grade, having an average API of 8.5°. According to Rigzone:

Outside the Faja [Orinoco River area], Venezuela has 80 billion barrels of proven crude reserves, and currently estimates that producers in the Faja can extract at least 237 billion barrels of the extra heavy crude with existing technology. With nearly 320 billion barrels of recoverable oil, Venezuela will become the world's largest holder of petroleum reserves.

The Faja's crude is what producers call extra-heavy. Oil from this tar belt averages about 8.5 API gravity, which means that it is heavier than water and oozes rather than flows. This type of oil is difficult to produce and transport, and few refineries in the world will take it. But producers in Venezuela have plenty of experience with heavy oil, and their success so far has been world-class.

The Houston Chronicle provides more details on the commercial arrangements being undertaken by Venezuela. Note that Western oil companies have been put at the back of the bus, figuratively speaking:

In the 1990s, the Faja was divided into four major regions [Boyaca, Junin, Ayacucho, and Carabobo], each being developed through joint ventures with major international oil companies and PDVSA.

Experts have long speculated that heavy oil and bitumen deposits in Venezuela's Orinoco River basin may contain more than 235 billion barrels of commercially extractable petroleum. If that amount can be certified by outside experts and added to conventional reserves, Venezuela would reach 316 billion barrels, moving past No. 1 Saudi Arabia, which holds 262 billion barrels, according to the Oil and Gas Journal.

More than just bragging rights is at stake in PDVSA's two-year certification effort, called the Magna Reserve project.

To prove its Orinoco reserves, PDVSA is carrying out seismic studies and test drilling with the help of national energy companies from Brazil [Petrobras], China [CNPC], India [ONGC], Iran PetroPars), Russia [Lukoil] and elsewhere. When negotiating joint ventures with PDVSA, these newcomers are expected to have a leg up on U.S. firms - which played a major role in developing the Orinoco in the 1990s.

A TOTAL study notes that a key to the full realization of the production potential of these ultra heavy oil reserves will be technology, and more precisely how to find methods allowing to improve recovery rates at acceptable costs and without excessive energy consumption. At present, Venezuela mainly uses a so-called "cold heavy oil production with sand" (CHOPS) method in the region. It recovers less than 10 percent of the oil in place. Targets for subsequent heavy oil projects have been set at 20%, thus producers should utilize more advanced technologies in the near future. If they are able to do so, then the Bolivarian revolution may be in place for quite some time.