Venezuelan oil: don’t get overexcited
President Trump’s bizarre assault on the Venezuelan government has naturally been linked by many commentators – not least by Trump himself – to the supposedly rich pickings to be found in that sad country’s delapidated oil industry. There is indeed plenty of oil left to be produced in Venezuela, but not the 300 billion barrels regularly quoted – more than Saudi Arabia!
Most of the barrels swelling the statistics are found in the Orinoco Belt, an enormous deposit of bitumen lying below the Orinoco river in eastern Venezuela. Although technically these barrels are producible, they are not crude oil as usually understood: they are too heavy, too full of trace elements to be refined into petrol, heating oil and kerosene in the way that conventional crudes are.
Unsurprisingly, attempts have been made to commercialise the Orinoco sludge: the resource is too big to ignore. The first well to be drilled there was by Standard Oil New Jersey (now known as Exxon Mobil) in 1936. It was abandoned in 1938. The most determined effort was the Petroleos de Venezuela (PdV) programme to emulsify it with water and surfactant chemicals and sell it as power station fuel under the name Orimulsion.
The only buyers, back in the 1990s, were the British companies National Power and Powergen, both intending to burn the stuff in old oil-fired power stations at Pembroke, Richborough, Kent and Ince, Cheshire. There was considerable (and justifiable) environmental opposition, but the deals were pushed through by the British government, probably attracted by the heavily discounted prices offered by the desperate Venezuelans.
The results were poor. At Richborough, sulphur and vanadium emissions from burning Orimulsion damaged crops and the paintwork of hundreds of newly imported cars parked nearby. In both cases Powergen settled out of court, before closing Ince and Richborough in 1996 on “economic grounds”. In the intervening 30 years PdV seems to have given up on the Orinoco “riches”. I can’t imagine Donald Trump, let alone major US oil companies, throwing good money after bad.
Conventional Venezuelan hydrocarbons were first discovered in 1922 by the great British geologist George Reynolds, who in 1908 had also found the first oil in Iran. Although oil made Venezuela dollar-rich, it also sometimes turned it into a kleptocracy, most recently under Chavez and Maduro. This is particularly sad because the Venezuelans are an intelligent and creative people who, like most of us, crave honest and orderly government. They have in the past proved more than capable of dealing with the exploitative tendencies of the international oil industry.
In particular, Juan Pablo Perez Alfonso, Minister of Development in 1947, changed the rules so that Venezuela received 50% of all oil revenues, in the teeth of oil company opposition. Later, as Minister of Mines and Hydrocarbons, he was instrumental in the creation of the Organisation of Petroleum Exporting Countries (OPEC), having first explained to the Saudis and Iranians how the oil companies were ripping their countries off. Let us hope that a latter day Perez Alfonso emerges to protect his country’s interests from the depredations of the Trumpistas.
Patrick Heren is a journalist, the founder of the Heren Index of gas prices and an advisor to British governments on energy procurement.
A Message from TheArticle
We are the only publication that’s committed to covering every angle. We have an important contribution to make, one that’s needed now more than ever, and we need your help to continue publishing throughout these hard economic times. So please, make a donation.
