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PdV to increase light oil imports to act as diluent

Venezuela's PdV is ramping up imports of light oil to use as diluent at its Orinoco projects

PdV has been importing around 48,000 barrels of light crude a day to its Isla refinery in Curacao, freeing up domestically-produced Mesa and Santa Barbara light crude grades to be used as diluent in the Orinoco oilfields, Jesus Luongo, a senior executive in the downstream and marketing business, said in a statement.

Luongo said that the 48,000 barrels a day (b/d) figure is up 15% from 2014, and that light crude imports are expected to rise to around 65,000 b/d in 2016.

The Orinoco belt holds vast amounts of extra-heavy oil, but turning it into marketable crude requires post-production upgrading. This has historically been done at a series of upgraders along the country's Caribbean coast, where naphtha is used to dilute the oil into a more refinery-friendly crude grade.

The existing upgraders, though, are aging and at capacity, effectively putting a cap on production. Building new facilities will cost billions of dollars that cash-strapped PdV doesn't have, and could take years to finish.

Eulogio del Pino, PdV's chief executive and newly-minted energy minister, is pushing a strategy to use light oil - which is cheaper than naphtha - to blend directly with the heavy oil to create a new 16° API marketable grade, avoiding the need to use upgraders.

PdV's own light oil production from the Maracaibo area is in decline, complicating the strategy and requiring imports.

Building new facilities will cost billions of dollars that cash strapped PdV doesn't have, and could take years to finish

So far, Luongo said, PdV has been buying light crude off spots market. But it is reportedly tendering supply contracts for a steadier stream of light oil. International majors active in West Africa, including Shell and Total, are potential suppliers. When PdV started experimenting with the blending strategy, it bought supplies from Algeria, but del Pino has said that the Algerian imports were too expensive.

Luongo added that a steady flow of imports would be needed until upgraders could be built. At $5bn to $6bn a piece, though, it could take some time for PdV to marshal the necessary resources.

Del Pino told Petroleum Economist that he saw an opportunity for cooperation with Opec's West African producers, who have seen import demand for light, sweet crude in the US collapse as shale production has flooded markets.

PdV hopes the new strategy will allow it to lift Orinoco production by as much 0.5m b/d over the next couple of years - and it is the country's best hope for turning around its struggling oil industry. The company says it needs around three barrels of light oil for every 10 barrels of heavy oil to create the new blended crude grade. Plunging oil prices, however, will complicate any essential investment plans.

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