Oil in Venezuela: $76 billion buys 600,000 barrels a day or 3.5 million

On August 28, Caracas's statement on the oil agreement with the United States spoke of investment of more than $100 billion. That same day, the Secretary of State wrote that the deal would bring nearly $100 billion in private investment, and the White House fact sheet of August 31 put it at up to $100 billion. More than, nearly, up to: the same number for the same agreement, said three ways, and none with a time frame.

On October 17, at the close of the oil conference in Maracaibo, the acting president gave another. She said that in five years investment will be almost $76 billion, and the next day she called it projected investment. She did not say when the five years start, which agreements the figure adds up or how much falls to each company.

The second figure does not correct the first: it measures a different perimeter, and the two cannot be subtracted.

Two amounts with different perimeters

August's is the figure for the binational agreement: seventeen fields, one U.S. operator, North American Blue Energy Partners, and a target of more than 1.5 million barrels a day. October's seems to cover something larger. In the same speech, the acting president placed the U.S. agreement alongside "the rest of the agreements, of the 61 agreements that have been signed"; that the $76 billion is the sum of those 61 is the most natural reading, not something she said.

Only one document gives August's figure a horizon. In early September, according to PDVSA's official channel, its president spoke of $100 billion in direct investment "over the next 25 years." If that spending were even, it would be $4 billion a year and about $20 billion in the first five years, which would leave about $56 billion for the other sixty agreements.

Nothing suggests it is even. NABEP aims to exceed one million barrels a day in the near term, and that front-loads the spending. And what has a known amount outside the binational deal adds up to about $22 billion at most: the more than $7 billion Chevron's joint ventures plan to invest over five years, the $7 billion GeoPark projects for the Bare block through 2038, and what is attributed to Eni at Junín 5 and to KEO at PetroUrdaneta.

With what has been published, the numbers can neither be reconciled nor ruled out. Missing are the list of the 61, the date the five years begin and NABEP's spending schedule.

Nor was the $100 billion new in August. In January, the U.S. president had said oil companies would spend at least $100 billion in Venezuela. That was an exhortation to the industry; August's was a company's plan.

What a barrel is worth

An investment amount says little on its own. What turns dollars into production is the cost of each barrel a day of new capacity, and across Venezuelan programs that cost varies almost sixfold.

Chevron's joint ventures plan to invest more than $7 billion over five years to bring their output to about 600,000 barrels a day, with total costs the company puts at under $20 a barrel. Depending on the starting base —250,000 barrels a day, the figure PDVSA gives, or somewhat under 300,000, as the release itself implies— each new barrel a day costs it between $20,000 and $23,000. PDVSA, moreover, sets those joint ventures a different target: about 420,000 barrels a day in ten years, in a first phase.

NABEP, with nearly $100 billion to go from about 200,000 barrels a day to more than a million, pays about $125,000 per barrel a day; if the target were Caracas's 1.5 million, about $77,000. GeoPark, with $7 billion to take Bare from 11,000 to about 90,000 barrels a day by 2038, about $88,600. NABEP itself says it went from 18,000 to more than 200,000 barrels a day with about $1 billion, a little over $5,000 per barrel a day: that was reactivating what already existed.

The gap between those figures has to do with where the money is spent. Chevron is expanding three joint ventures that already produce, and the two greenfield areas it received in September, Carabobo-1 and Carabobo-2-South-A, are adjacent to one of those operations. Eight of the binational agreement's areas, according to PDVSA, are greenfield areas with no prior infrastructure.

The same money buys between 600,000 barrels a day and 3.5 million, and what has been published points to the low end of the range: according to PDVSA, 65% of the signed agreements are for greenfield areas, and the 61 include gas, such as the Perla alliance with Repsol and Eni, which adds not a single barrel of crude.

Ten weeks in Zulia

The nearest test is not at the end of the five years but in December. In Maracaibo, the acting president said Zulia had been producing 70,000 barrels a day, produces 370,000 today and will close the year at 400,000. PDVSA had set that same target for the western basin a day earlier, as part of the national goal of 1.3 million by December 31.

That is 30,000 more barrels a day in about ten weeks, half of the 60,000 that separate the output PDVSA reports, about 1.24 million, from the year-end goal. For OPEC, using secondary sources, September output was 1.15 million; the figure Venezuela communicated directly was just over 1.2.

Ten weeks are enough to reactivate wells, not to build new capacity.

The physical counter of investment moves slowly. OPEC, using Baker Hughes data, counted two active drilling rigs in Venezuela in July and two in August. In Maracaibo, the acting president said the binational agreement alone contemplates 250. NABEP announced on October 13 that two new drilling rigs had arrived on the 7th, along with eleven workover rigs.

The number that is published every month

The $76 billion will start to mean something when it has what it lacked as of October 18: the list of the 61 agreements with their amounts, the date the five years begin and a spending schedule. Until then, the figure that measures whether the money is turning into wells, the drilling-rig count Baker Hughes compiles, comes out every month and, in August, was a single digit.

Two rigs.