Oil Production Starts at the Junin-6 Block in Venezuela

27 September 2012

The first oil production has started at the Junin-6 block in the Orinoco River basin in Venezuela. The giant Junin-6 oil field, which has geological reserves of over 50 billion barrels of oil, will be developed on a parity basis by a consortium of five major Russian oil companies: Gazprom Neft, LUKOIL, Rosneft, Surgutneftegaz and TNK-BP through OOO National Oil Consortium (NOC).

In 2010, the Board of Directors of NOC selected Gazprom Neft to lead project coordination on the Russian side in the PetroMiranda Joint Venture (operator of the Junin-6 block). Under Venezuelan law, 60% of PetroMiranda is owned by a subsidiary of Venezuela's state oil company PDVSA – Corporacion Venezolana del Petroleo (CVP), and 40% is owned by NOC.

Over the past two years, all the necessary project preparatory work has been completed. An office of the JV was opened in Puerto La Cruz where there are now more than 200 employees. Further, five sites for drilling appraisal wells and geological exploration of the block have been built, with the first appraisal well having already been drilled. Infrastructure development also continues and the conceptual design of an upgrader – a unit needed to improve the quality of heavy oil from the Orinoco River belt - has been completed.

In Spring 2012, the project shareholders supported the suggestion to start “early production” of oil at the field - putting the Junin-6 block into operation even before the final investment decision (FID) has been taken. The start-up of production was made possible by the completion of the drilling of the first horizontal production well in August 2012.

During the “early production” stage the production at the block will reach 50 thousand barrels of oil per day. It is planned that the block will supply up to 10 thousand barrels of crude per day by road to an oil treatment facility at the neighbouring Petrosidenia field, with the introduction of a pipeline after production increases. The construction of PetroMiranda’s own upgrader is expected to be completed in 5 years.

During the “early production” stage PetroMiranda will be in charge of oil marketing. The cashflow from oil sales will allow investors to start getting returns on their investments.

Alexander Dyukov, Chairman of Gazprom Neft’s Management Board said: “The beginning of oil production at the Junin-6 block is a landmark event for us. Acting as the project leader on the Russian side, Gazprom Neft has done everything necessary to begin developing the block. This has allowed the next stage of the development of this unique oil field to begin.”

REFERENCE

The geological reserves at the Junin-6 block are 52.6 billion barrels of oil, with 10.96 billion barrels recoverable. The block covers an area of 447.85 sq. km. Total development costs for Junin-6 are estimated at nearly $25 billion. At the peak of production, the field is expected to produce up to 450 thousand barrels per day (about 22.5 million tonnes of oil per year).