Energy policy of Venezuela


has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere. In addition Venezuela has non-conventional oil deposits approximately equal to the world's reserves of conventional oil. Venezuela is also amongst world leaders in hydroelectric production, supplying a majority of the nation's electrical power through the process.

Development of energy policies

Venezuela nationalized its oil industry in 1975–1976, creating Petróleos de Venezuela S.A., the country's state-run oil and natural gas company. Along with being Venezuela's largest employer, PdVSA accounts for about one-third of the country's GDP, 50% of the government's revenue and 80% of Venezuela's exports earnings.
The policy changed in the 1990s, when Venezuela introduced a new oil policy known as label=none, which opened its upstream oil sector to private investments. This facilitated the creation of 32 operating service agreements with 22 separate foreign oil companies, including international oil majors like Chevron, BP, Total, and Repsol-YPF. The role of PdVSA in making national oil policy increased significantly. In 1999, Venezuela adopted the Gas Hydrocarbons Law, which opened all aspects of the sector to private investment.
This policy changed after Hugo Chávez took the presidential post in 1999. In recent years the Venezuelan government has reduced PdVSA's previous autonomy and amended the rules regulating the country's hydrocarbons sector. In 2001, Venezuela passed a new Hydrocarbons Law that superseded the previous 1943 Hydrocarbons Law and 1975 Nationalization Law. Under the 2001 law, royalties paid by private companies increased from 1-17% to 20-30%. Venezuela started to strictly adhere to OPEC production quotas. The ownership separation of power generation, transmission, distribution and supply functions was required by 2003 but still not enforced.
Venezuela's new energy policy implemented by President Chávez in 2005 includes six major projects:
In 2007, Chávez announced the nationalization of the oil industry. The foreign oil companies were forced to sign agreements giving majority control of hydrocarbons projects to PdVSA. Projects owned by companies like ConocoPhillips and ExxonMobil, who failed to sign these agreements, were taken over by PdVSA.
Venezuela's oil production has fallen by a quarter since President Chávez took office and falling oil prices have affected the government budget severely. However, since 2009, oil prices have surged, and more nations around the world are turning to Venezuela's large oil reserves to boost tight energy supplies: Italy's Eni SpA, Petrovietnam and Japanese companies including Itochu Corp. and Marubeni Corp. have signed on to, or are in negotiations to sign on to, joint-ventures with PdVSA. China National Petroleum Corp., or CNPC, also signed a $16.3 billion joint-venture agreement for a project that will eventually pump an additional for Asian refineries. Separately, Venezuela has been exporting of crude to China to repay $20 billion of loans extended by the China Development Bank Corp. in April 2010 to finance much-needed infrastructure projects in Venezuela. PdVSA is selling oil at market prices to repay the 10-year loan. Shipments to repay the debt represent half Venezuela's daily crude exports to China.

Primary energy sources

Oil

Venezuela has been producing oil for nearly a century and was an OPEC founder-member. In 2005, Venezuela produced 162 million tons of oil, which is 4.1% of world's total production. By the oil production Venezuela ranks seventh in the world. Venezuela is the world's eight oil exporter and fifth largest net exporter. In 2012, 11 percent of US oil imports came from Venezuela.
Since 2010, when the heavy oil from the Orinoco Belt was considered to be economically recoverable, Venezuela has had the largest proved reserves of petroleum in the world, about 298 billion barrels.
Oil accounts for about half of total government revenues. The leading oil company is Petróleos de Venezuela S.A., which according to Venezuelan authorities produces. However, oil industry analysts and the U.S. Energy Information Administration believe it to be only 2.8-. Venezuela's main oil fields are located at four major sedimentary basins: Maracaibo, Falcon, Apure, and Oriental. PdVSA has of crude oil refining capacity. The major facilities are the Paraguaná Refining Center, Puerto de la Cruz, and El Palito.

Natural gas

As of 2013, Venezuela has the eighth-largest proved natural gas reserves in the world and the largest in South America. Proved reserves were estimated at 5.5 trillion cubic meters. However, inadequate transportation and distribution infrastructure has prevented it from making the most of its resources. More than 70% of domestic gas production is consumed by the petroleum industry. Nearly 35% of gross natural gas output are re-injected in order to boost or maintain reservoir pressures, while smaller
amounts are vented or flared. About 10% of production volumes are subject to shrinkage as a result of the extraction of NGLs. The 2010 estimate is, and the nation reportedly produced about in 2008.
The leading gas company is PdVSA. The largest private natural gas producer is Repsol-YPF, who supplies 80-megawatt power station in Portuguesa, and plans to develop a 450-MW power plant in Obispos.

Tar sands and heavy oils

Venezuela has non-conventional oil deposits at approximately equal to the world's reserves of conventional oil. About of this may be producible at current prices using current technology. The main deposits are located in the Orinoco Belt in central Venezuela, some deposits are also found in the Maracaibo Basin and Lake Guanoco, near the Caribbean coast.

Coal

Venezuela has recoverable coal reserves of approximately 528 million short tons, most of which is bituminous.
Coal production was at 9.254 million short tons as of 2007. Most coal exports go to Latin American countries, the United States and Europe.
The main coal company in Venezuelas is Carbozulia, a former subsidiary of PdVSA, which is controlled by Venezuela's state development agency Corpozulia. The major coal-producing region in Venezuela is the Guasare Basin, which is located near the Colombian border. The coal industry development plans include the construction of a railway linking coal mines to the coast and a new deepwater port.

Electricity

The main electricity source is hydropower, which accounts for 71% in 2004. A gross theoretical capability of hydropower is 320 TWh per annum, of which 130 TWh per annum is considered as economically feasible. In 2004, Venezuela produced 70 TWh of hydropower, which accounts 2.5% of world's total. At the end of 2002, total installed hydroelectric generating capacity accounted 13.76 GW with additional 4.5 GW under construction and 7.4 GW of planned capacity.
Hydroelectricity production is concentrated on the Caroní River in Guayana Region. Today it has 4 different dams. The largest hydroplant is the Guri dam with 10,200 MW of installed capacity, which makes it the third-largest hydroelectric plant in the world. Other facilities on the Caroní are Caruachi, Macagua I, Macagua II and Macagua III, with a total of 15.910 MW of installed capacity in 2003. New dams, Tocoma and Tayucay, are currently under construction between Guri and Caruachi. With a projected installed capacity for the whole Hydroelectric Complex, between 17.250 and 20.000 MW in 2010.
The largest power companies are state-owned CVG Electrificación del Caroní, a subsidiary of the mining company Corporación Venezolana de Guayana, and Compania Anonima de Administracion y Fomento Electrico accounting respectively for approximately 63% and 18% of generating capacities. Other state-owned power companies are ENELBAR and ENELVEN-ENELCO. In 2007, PDVSA bought 82.14% percent of Electricidad de Caracas from AES Corporation as part of a renationalization program. Subsequently, the ownership share rose to 93.62%. EDC has 11% of Venezuelan capacity, and owns the majority of conventional thermal power plants. The rest of the power production is owned by private companies.
The national transmission system is composed by four interconnected regional transmission systems operated by EDELCA, CADAFE, EDC and ENELVEN-ENELCO. Oficina de Operacion de Sistema Interconectados, jointly owned by the four vertical integrated electric companies, operate the SIN under an RTPA regime.

Environmental issues

Prolonged oil production has resulted in significant oil pollution along the Caribbean coast. Hydrocarbons extraction has resulted also in the subsiding of the eastern shore of Lake Maracaibo, South America's largest lake. Venezuela is also the region's top emitter of carbon dioxide.

Regional cooperation

Venezuela has pushed the creation of regional oil initiatives for the Caribbean, the Andean region, and South America, and Latin America. The initiatives include assistance for oil developments, investments in refining capacity, and preferential oil pricing. The most developed of these three is the Petrocaribe initiative, with 13 nations signed agreement in 2005. Under Petrocaribe, Venezuela will offer crude oil and petroleum products to Caribbean nations under preferential terms and prices. The payment system allows for a few nations to buy oil on market value but only a certain amount is needed up front; the remainder can be paid through a 25-year financing agreement on 1% interest. The deal allows for the Caribbean nations to purchase up to of oil per day on these terms. In addition it allows for nations to pay part of the cost with other products provided to Venezuela, such as bananas, rice, and sugar.
In 2000, Venezuela and Cuba signed an agreement, which grants Venezuelan oil supplies to Cuba.
In 2006, the construction of the Trans-Caribbean gas pipeline, which will connect Venezuela and Colombia with extension to Panama began. The pipeline will pump gas from Colombia to Venezuela and, after 7 years, from Venezuela to Colombia. Venezuela has also proposed the project of Gran Gasoducto del Sur, which would connect Venezuela with Brazil and Argentina. There has been some discussion about constructing an oil pipeline to Colombia along the Pacific Ocean.
Venezuela also exports electricity to neighboring countries. Santa Elena/Boa Vista Interconnector permits electricity export to Brazil, and Cuatricenternario/Cuestecitas Interconnector and EI Corozo/San Mateo Interconnector to Colombia.
Venezuela may suffer a deterioration of its power in international affairs if the global transition to renewable energy is completed. It is ranked 151 out of 156 countries in the index of Geopolitical Gains and Losses after energy transition.