Extra-heavy Oil Monetization Strategies: Is Venezuela Losing its Golden Opportunity?

Venezuela's vast extra-heavy oil (EHO) resources could constitute one of the best ways of creating value while bringing the country to the forefront of oil production worldwide. Building up necessary and sustainable EHO production capacity for the long term requires a regulatory framework today conducive to new investments, as well as the continuous development and application of a diversified portfolio of new technologies and monetization alternatives.

* Recent changes in Venezuela's fiscal framework, creeping government take, lengthy negotiations over legally mandated government participation in all upstream activities, and a general disregard for private sector requirements have delayed new investments and increased risks for EHO projects.
* The golden opportunity for EHO value maximization can only be captured by continuously developing and implementing a diversified portfolio of technologies that evolve into commercially sound projects within a stable institutional framework and with clear incentives to new investments and developments.
* The Canadian oil sands require much higher investment and operational costs, and have a higher level of complexity than the Venezuelan EHO projects. However, these developments have become cost competitive through the continuous application of new technologies and fiscal incentives, with production levels currently double Venezuela's today-and firm plans to grow threefold by 2015.

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