Rafael Ramirez and Hugo Chavez lie about the oil proven reserves of the Orinoco Region

Rafael Ramirez, the Venezuelan Minister of Energy and Petroleum, has recently stated that the proven oil reserves of the Orinoco region already make of Venezuela the country with the largest oil reserves in the world, ahead of Saudi Arabia. Ramirez should explain to domestic and international public opinion how they have “certified” these proven oil reserves of the Orinoco region. I think he is commiting a huge fraud. I say Ramirez lies.

Hugo Chavez stated the very same thing a few days ago. He announced that Venezuela had brought the Orinoco region proven oil reserves up to 297 billion barrels and had increased these proven oil reserves by 80 billion barrels in just a few months. Being a complete ignorant in petroleum matters Hugo Chavez was just repeating what his oil managers told him, that Venezuela had the largest proven oil reserves in the world. He has no idea of how his oil managers “cuantified” these reserves. To him it was enough to be able to say that Venezuela contains the largest oil proven reserves in the world. I say Chavez lies.

Ramirez is quoted in an AFP agency report saying that “Venezuela managed to certify a volume of oil reserves of 297 billion barrels, volume that puts Venezuela in first place as having the greatest oil deposits in the world, ahead of Saudi Arabia”. He is further quoted as saying that “by the end of 2010 we were at the level of 217 billion barrels of oil and we are now, at the start of 2011, in a position to certify 297 billion barrels”. This would represent an increase in proven oil reserves of 80 billion barrels in just a matter of weeks. For illustration purposes this “newly certified” volume equals about four times the total oil proven reserves of the United States, or twice the proven reserves of Libya or seven times the proven oil reserves of Mexico. All of this practically overnight. I say this is balloney.

Geologists and petroleum engineers know how much oil is probably present in the subsurface of the Orinoco region. For about 50 years the estimate has been rather well established at about 1,3 trillion barrels. But this amount of oil is in place and has to be brought to the surface, has to be recovered. The nature of this oil is such that under existing economic, technical and operational conditions not much more of 10-12 percent can be eventually recovered within a reasonable time, say 50 years. This would mean that the Orinoco region contains about 120-140 billion barrels of recoverable oil at existing conditions. This would be a technically defensible estimate of proven reserves for this region . And even this figure would be rather less certain than proven reserves of more conventional, lighter oil, in other areas of Venezuela or the world.

Without enough new information on the region Minister Ramirez simply has “ordered” the oil industry to assume a recovery factor of the oil in place in the region of 20 percent, twice as large. Of course, such an order has had the magic effect of “doubling” the “proven” reserves. This is what they have done. Representatives of the Saudi government have reacted to this statement by Ramirez by saying, simply : “this is an internal matter of Venezuela. If they say they have one hundred times more oil than we do, that is their business”. In other words, the Saudis have received this statement by Ramirez with a smile. They know that what these people are doing has no valid technical basis, and is only for geopolitical purposes, to gain more “energy punch”, in the eyes of other countries.

But not in the eyes of those who know. According to international standards “proven reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations. The term reasonable certainty is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate”.

The “certification” pretended by Ramirez fails to meet this standard in almost every component of certainty, time, economic conditions and existing operating methods.

I say that Rafael Ramirez and Hugo Chavez lie.