Venezuela is one of the world's largest exporters of crude oil and the largest in the

Western Hemisphere. According to Oil and Gas Journal (OGJ), Venezuela had 211 billion
barrels of proven oil reserves in 2011, the second largest in the world. Reserves could be even
bigger at 316 billion barrels, with further investigation from the "Magna Reserva" project.
In 2010 the country had net oil exports of 1.7 million barrels per day (bbl/d), the eighth-
largest in the world and the largest in the Western Hemisphere. While crude oil production for
2011 increased 100,000 bbl/d (and equaled 2009 levels), overall production levels have declined
by roughly one-quarter since 2001. Natural decline at older fields, maintenance issues, and the
need for increasing foreign investment are behind this trend. In addition, net oil exports have also
declined since domestic consumption has increased 39% since 2001.
As of 2010, Venezuela maintained roughly 5,500 miles of oil pipelines to service the
country's domestic consumption. Venezuela nationalized its oil industry in the 1970s, creating
Petroleos de Venezuela S.A. (PdVSA), the country's state-run oil and natural gas company.
Along with being Venezuela's largest employer, PdVSA accounts for a significant share of the
country's GDP, government revenue, and export earnings. During the
1990s, Venezuela took steps to liberalize the petroleum sector. However, since the
election of Hugo Chavez in 1999, Venezuela has increased public participation in the oil
industry. The Chavez government initially raised tax and royalty rates on new and existing
projects and mandated majority PdVSA ownership of all oil projects.
In 2002, nearly half of PdVSA's employees walked off the job in protest against the rule
of President Chavez, largely bringing the company's operations to a halt. In the wake of the
strike, PdVSA fired 18,000 workers and overhauled the internal organization in order to solidify
government control. In 2006, Chavez implemented the nationalization of oil exploration and
production in Venezuela, mandating a renegotiation of a 60% minimum PdVSA share in
projects. Sixteen firms, including Chevron and Shell, complied with new agreements, while
Total and Eni were forcibly taken over. Venezuela is also increasing pressure on foreign
operators that remain in the country to increase investment to offset recent production declines.
EIA estimates that the country produced around 2.47 million bbl/d of oil in 2011. Crude
oil represented 2.24 million bbl/d of this total, with condensates and natural gas liquids (NGLs)
accounting for the remaining production. Estimates of Venezuelan production vary from source
to source, partly due to measurement methodology. For instance, some analysts directly count
the extra-heavy oil produced in Venezuela's Orinoco Belt as part of Venezuela's crude oil
production. Others (including EIA) count it as upgraded syncrude, whose volume is about 10
percent lower than that of the original extra-heavy feedstock.
Venezuela's conventional crude oil is heavy and sour by international standards. As a
result, much of Venezuela's oil production must go to specialized domestic and international
refineries. The country's most prolific production area is the Maracaibo basin, which contains
slightly less than half of Venezuela's oil production. Many of Venezuela's fields are very mature,
requiring heavy investment to maintain current capacity. Industry analysts estimate that PdVSA
must spend some $3 billion each year just to maintain production levels at existing fields, given
decline rates of at least 25 percent.
Venezuela contains billions of barrels in extra-heavy crude oil and bitumen deposits,
most of which are situated in the Orinoco Belt in central Venezuela. According to a study
released by the U.S. Geological Survey, the mean estimate of recoverable oil resources from the
Orinoco Belt is 513 billion barrels of crude oil. PdVSA began the 'Magna Reserva' project in
2005, which involved dividing the Orinoco region into four areas and further divided into 28
blocks and quantifying the reserves in place. This initiative resulted in the upgrading of
Venezuelan reserve estimates by more than 100 billion barrels.
In the 1990's, Venezuela's PdVSA established four strategic associations to exploit these
resources. After the implementation of the nationalization policy in 2007, the strategic
associations led by ConocoPhillips, ExxonMobil, and Total with minority stakes held by
Chevron, BP, Statoil and PdVSA became newly formed mixed companies led by PdVSA
holding majority shares. The nationalization also resulted in the exit of ConocoPhillips and
ExxonMobil, who were unable to reach new agreements.
These projects involve converting the extra heavy crude and bitumen to lighter, sweeter
crude, known as syncrude. The upgrading facilities themselves introduce another element of risk
into Venezuela's petroleum supply chain. While the country's four upgraders have installed
production capacity of about 600,000 bbl/d of syncrude, industry estimates place these projects'
production levels at less than 500,000 bbl/d due to maintenance and safety issues.
Venezuela plans to develop further the Orinoco Belt oil resources in the coming years.
According to OGJ, Venezuela had 1.28 million bbl/d of crude oil refining capacity in 2012, all
operated by PdVSA. The major facilities include the Paraguana Refining Center (955,000 bbl/d),
Puerto de la Cruz (195,000 bbl/d), El Palito (126,900 bbl/d), and San Roque (5,200 bbl/d).
Through PdVSA and its subsidiary CITGO, Venezuela also controls significant refining capacity
outside of the country (see chart) giving it a total global refining capacity of 2.8 million bbl/d.
The largest share of Venezuela's global downstream operations is in the United States.
CITGO, a wholly-owned subsidiary of PdVSA, operates three refineries (Lake Charles, LA;
Corpus Christi, TX; Lemont, IL), with a combined crude oil distillation capacity of 755,400
bbl/d. CITGO's gulf coast refineries source most of their crude oil with PdVSA under long-term
supply contracts. PdVSA also owns a 50-percent stake in the 189,000-bbl/d Chalmette facility in
Louisiana.
In 2009 ConocoPhillips exercised the option to purchase PdVSA's share of their refinery
in Sweeny, Texas. This move, coupled with Venezuela's sale of its equity stake in Germany's
Ruhr Oel GmbH to Rosneft, constitutes a substantial contraction of Venezuela's net global
capacity. Minor equity acquisitions in the Caribbean have partially offset this change. Venezuela
plans to expand domestic refineries and into other global refining markets. Domestically,
Venezuela plans to add a capacity of more than 400,000 bbl/d by 2020. Notable planned global
refinery builds include a 400,000 bbl/d joint venture with PetroChina in Guandong province, a
300,000 bbl/d joint venture with Petroecuador in Manabi, and a 230,000 bbl/d joint venture with
Petrobras in northeastern Brazil.
The offshore Campos and Santos Basins, located off the country's southeast coast, hold
the vast majority of Brazil's proved reserves. In 2012, Brazil produced 2.7 million barrels per day
(bbl/d) of liquid fuels, of which 78% was crude oil. Liquid fuels production in Brazil declined
slightly in 2012.
In March 2013, Brazil launched a 10-year energy plan that aims to expand oil production
to over 5 million bbl/d by 2021, a decrease from its previous plan of over 6 million bbl/d by
2020. The plan sets targets for oil exports of over 2.25 million bbl/d by 2021.
State-controlled Petrobras is the dominant participant in Brazil's oil sector, holding
important positions in upstream, midstream, and downstream activities. The company held a
monopoly on oil-related activities in the country until 1997, when the government opened the
sector to competition. Royal Dutch Shell was the first foreign crude oil producer in the country,
and it has now been joined by Chevron, Repsol, BP, Anadarko, El Paso, Galp Energia, Statoil,
BG Group, Sinopec, ONGC, and TNK-BP. Competition in the sector is not just from foreign
companies: Brazilian oil company OGX, which is staffed largely with former Petrobras
employees, started to produce oil in the Campos Basin in 2011.
The principal government agency charged with regulating and monitoring the oil sector is
the Agncia Nacional do Petrleo (ANP), which is responsible for issuing exploration and
production licenses and ensuring compliance with relevant regulations. Recent legislation
concerning pre-salt exploration and production has changed the operating environment
somewhat. A full discussion of this situation can be found in the "Pre-salt oil" section.
Most Brazilian oil is currently produced in the southeastern region of the country in Rio
de Janeiro and Esprito Santo states. More than 90% of Brazil's oil production is offshore in very
deep water and consists of mostly heavy grades. Six fields in the Campos Basin (Marlim, Marlim
Sul, Marlim Leste, Roncador, Jubarte, and Barracuda) account for more than half of Brazil's
crude oil production. These Petrobras-operated fields each produce between 100,000 bbl/d and
350,000 bbl/d.
International oil companies also play a role in Brazilian production. The Shell-operated
Parque de Conchas project and the Chevron-operated Frade projects produce 75,000 bbl/d and
85,000 bbl/d, respectively. In November 2011, Chevron reported an oil spill of about 2,400
barrels at the Frade facility. And in March 2012, Chevron detected another seep in a different
location in the Frade field. Although Chevron took full responsibility for the accident and has
paid more than $27 million in fines, the spill has caused many Brazilian legislators to question
Chevron's presence in their country.
Recent offshore exploration efforts in Brazil have yielded massive discoveries of pre-salt
oil fields, which are oil fields situated under layers of rock and thick layers of salt. Pre-salt oil is
generally characterized as oil reserves situated exceptionally deep under thick layers of rock and
salt and requiring substantial investment to extract. A consortium of Petrobras, BG Group, and
Petrogal discovered the Tupi field in 2007, which contains substantial reserves in a pre-salt zone
18,000 feet below the ocean surface under a thick layer of salt. Following Tupi, many pre-salt
finds were announced in the Santos Basin, such as Iracema, Carioca, Iara, Libra, Franco and
Guara. Additional pre-salt discoveries were also announced in the Campos and Espirito Santo
Basins. Estimates for the total pre-salt resources vary. Some analysts place total extent of pre-salt
recoverable oil and natural gas reserves at more than 50 billion barrels of oil equivalent (boe).
In December, 2010 Petrobras submitted a declaration of commerciality to the ANP for the Tupi
and Iracema fields, which renamed the fields Lula and Cernambi, respectively. The total
recoverable reserve estimate for these fields is 8.3 billon boe (6.5 billion boe for Lula and 1.8
billion for Cernambi). In January, 2011, Petrobras declared the Sapinhoa (formerly Guara) field
to be commercial, with a recoverable reserve estimate of 1.1 billion boe.
Petrobras plans to develop its major pre-salt assets in three discrete phases: 1) extended well
tests; 2) pilot projects; 3) large-scale production through multiple, duplicate floating production,
storage, and offloading (FPSO) facilities. Pilot projects in the Lula and Sapinhoa fields began
production in 2010 and 2011, respectively. According to Petrobras, Brazil currently produces
more than 100,000 bbl/d of oil from its pre-salt fields.
In its 2013-2017 business plan, Petrobras laid out plans to invest $147.5 billion in
exploration and production, $73 billion of which will be in pre-salt exploration and production
activities. This investment constitutes a major increase from the $53 billion targeted at pre-salt
activities in the previous year's plan. The company is shifting its focus away from downstream
and international expansion to the domestic upstream sector. Although Petrobras will finance
most of this work through operating cash flow, the company's 2010 initial public offering ($67
billion) and 2011 and 2012 corporate debt offerings ($6 billion and $7 billion, respectively) all
set records.
Brazil's pre-salt announcements immediately transformed the nature and focus of Brazil's
oil sector. The potential impact of the discoveries upon world oil markets is vast. However,
considerable challenges still must be overcome to produce these reserves. Considering both the
large depths and pressures involved with pre-salt oil production, there are significant technical
hurdles that must be overcome. Further, the scale of the proposed expansion in production will
also stretch Petrobras' exploration and production resources and Brazil's infrastructure, as will
strict local content requirements.
Colombia produced 969,000 barrels per day (bbl/d) of oil in 2012, up 61% from the
604,000 bbl/d produced in 2008. EIA estimates that oil production in 2013 to be just over 1
million bbl/d and expects this rising trend to continue. The Ministry of Mines and Energy
reported that Colombian production is expected to reach 1.3 million bbl/d by 2020. Colombia
consumed 287,000 bbl/d in 2012, allowing the country to export most of its oil production.
The principal cause of the fall in oil production was natural declines at existing oil fields and a
lack of new reserve discoveries. However, a combination of changes to the regulatory framework
has contributed to increasing investment in the country by international oil companies.
As a result of these improvements, in 2008, Colombia reversed the decline in its oil production
that began in 1999 and is now experiencing rapid growth.
The largest producing oil field in the country is the Rubiales heavy oil field, located in
Meta department, and operated by partners Pacific Rubiales and Ecopetrol. Low levels of
production began at Rubiales in the late 1980s, but increasing investment and the completion of a
new pipeline have allowed production rates to rise in recent years. Gross production at Rubiales
exceeded 177,000 bbl/d in 2012, up from 37,000 bbl/d in 2008. Other large oil fields include
Cano Limon, Castilla, and Cupiagua.
In 2012, the United States was Colombia's top oil export destination, followed by
Panama, China, and Spain. In that year, Colombia exported 432,000 bbl/d of crude oil and
refined products to the United States. China expressed interest in financing new infrastructure
projects in Colombia to facilitate the transport of oil to the Pacific coast for export. In May 2012,
preliminary agreements were made for China Development Bank to finance a 600,000 bbl/d
pipeline to transport Colombian and Venezuelan oil to the south Colombian Pacific coast.
However, no significant developments have been made since then.
Colombia has six major oil pipelines, four of which connect production fields to the
Caribbean export terminal at Covenas. These include the 500-mile Ocensa pipeline, which has
the capacity to transport 650,000 bbl/d from the Cusiana/Cupiagua area; the 460-mile, 220,000
bbl/d-capacity Cano Limon pipeline; and the smaller Alto Magdalena and Colombia Oil
pipelines. The Llanos Orientales pipeline came online in late 2009, linking the Rubiales field to
the Ocensa pipeline, with a capacity of 340,000 bbl/d. The sixth pipeline, the TransAndino, has a
capacity of 190,000 bbl/d and transports crude from Colombia's Orito field in the Putumayo
basin to Colombia's Pacific port at Tumaco linking to Ecuador.
In November 2010, Ecopetrol announced that it is partnering with an international
consortium to develop the Oleoducto Bicentenario pipeline. This $4.2 billion project, currently
under construction, will have a peak capacity of 450,000 bbl/d. The first phase (110,000 bbl/d)
began operations in October 2013 transporting hydrocarbons from Araguaney to Banadia, where
it connects to the Cano Limon pipeline. The Oleoducto Bicentenario will eventually connect to
the export terminal in Covenas.
Pipelines and other energy infrastructure in the country are still the targets of attacks by
anti-government guerrillas. This rise in the number of attacks has led to significant increases in
unplanned production disruptions in Colombia. EIA estimates Colombia averaged 35,000 bbl/d
of unplanned production disruption so far in 2013, more than a 115% increase from 2012. The
increasing attacks on infrastructure are closely linked to the appointment of a new leader of the
anti-government Revolutionary Armed Forces of Colombia-People's Army (FARC).