REPORT 2 | GAS IN FREE FALL
Around 4 million families have to cook with firewood in the Country number eight with reserves in the world
HumVenezuela, May 2021 | Image: PROVEA
A PDVSA project that promised in 2010 to extend the domestic gas network by pipeline to the entire national territory disintegrated in an industry in which the State-owned PDVSA monopolizes the distribution of all the gas that is produced, including the one that comes from the company. The specialist Antero Alvarado explains why there is no gas in homes and only 25% of the demand of propane is satisfied.
Administrator with a Master’s degree in energy economics; Partner of Gas Energy Latin America in Venezuela, Antero Alvarado laments that, having the eighth largest gas reserve in the world, Venezuela has drastically lowered its total gas production since 2016. From almost eight billion cubic feet per day today it has dropped to just over 4.5 billion, with zero reinjection and a local market of nearly two billion cubic feet.
Two different natures define the gas used in homes. The one received through the pipeline network is called natural gas or methane gas. It is very abundant in Venezuela and its means of distribution is more effective than propane gas, which is distributed in bottles.
The production of propane gas (or liquefied gas) is linked to oil production. If oil production falls, so does propane production. For this associated gas to be usable, it first passes through a conditioning plant and only then it can be extracted. In this extraction process, the natural gas liquids are removed. The extraction plants are located in Jusepin, San Joaquín and Santa Bárbara (Monagas state, located in eastern Venezuela), and from there the gas is transported to the Jose Fractionation and Dispatch Plant (in Barcelona, Anzoátegui state), where These liquids are fractionated to obtain propane, butane, and natural gasoline.
So if there is no oil production, there is no propane gas, and if there is no propane gas, there are no cylinders. If there are no cylinders for those who do not have electricity, in a rationing scheme and recurring and unpredictable blackouts, the only option is of cooking with firewood, which is what is happening in Venezuela, where four million families are forced to expose themselves on a daily basis to risks of pulmonary diseases, only to be able to feed themselves.
The industry is a large consumer of propane to produce plastics, resins, alcohols, refrigerants, while methane is not suitable for this particular production. Having that immensity of reserves, Venezuela must import propane gas and stop the production of those goods, which were previously exported.
These petrochemical and cryogenic uses make propane an expensive gem. Generally speaking, cylinder gas for domestic use is inefficient. It is more expensive, and the containers have a short shelf life.
During certain periods the preponderance of the use of propane gas has represented a great limitation, among other things because when OPEC asked for cuts to favor prices, fields were closed, closures that impacted the gas balance. But today the lack of propane is more closely linked to the drop in oil production for other reasons, such as divestment and the consequent deterioration of the infrastructure. Today only 25% of the demand for propane gas (cylinders) is being satisfied.
The cheap and clean methane gas is currently sent through pipelines from the extraction plant to industrial zones and the domestic gas network, in the case of Caracas and Maracaibo, and goes to the domestic market as a raw material to Petrochemicals, Steelworks and power plants, where it is applied to feed furnaces and gas re-injection in oil fields.
All this was what Dr. Antero Alvarado explained in a conference for the UCV School of Social Work to which HumVenezuela had access.
Production in a tailspin
Measured in millions of cubic feet per day (MMscfd), gas production has fallen in Venezuela, after achieving its highest peak of 8,000 MMscfd in 2016. Thereafter, according to Alvarado, the market plummeted to nearly 2,600 MMscfd, which is equivalent to a loss of 29% of capacity. Gas reinjection completely disappeared in 2019.
In the ranking of the use of natural gas, historically and on average, from 2010 to 2020, the one destinated for electricity generation ranks number one; oil refining ranks second; the petrochemical industry on third; industry is the fourth; domestic gas the fifth; iron production the sixth; cement production the seventh and steel the eighth; the vehicle fleet is in ninth place.
Reserves without destination
“As Venezuela had such good oil revenues, we kept looking towards OPEC and forgot to create an adequate network of non-associated gas.” This is how Alvarado explains, in part, this debacle. The Country stopped exploiting oil and the entire associated gas (propane) distribution network collapsed.
Venezuela has large reserves of methane gas, although the largest are gas associated with crude oil, which represents a potential for propane, the most expensive and difficult to distribute, but for a long time it worked because oil exploitation was the number one economic activity.
“What the State would have to do in terms of energy policies is to use methane gas massively,” Alvarado explains to HumVenezuela. A large part of these reserves are in the sea, which implies an additional work to bringing it by pipeline to the consumption areas, and even so it is more profitable. Propane gas is more expensive because it goes through a fractionation process and can be used as a raw material in industry, so its value can be maximized. Instead of using it for a stove, it can be transformed into plastic. “
There is nothing better than direct gas to democratize the service. If today the Country had a pipeline distribution network it would not be cooking with firewood and some industries that need it would be productive.
The worst enemy
PDVSA’s monopoly on the distribution and sale of gas has been one of the main factors of the incompetence to satisfy demand. “Gas producers, even private ones, give everything to PDVSA Gas. For example, two private companies located in the Llanos cannot negotiate that gas to the electricity sector, but have to sell it to PDVSA Gas, which is the only buyer and buys at the price that they say and in the currency they want, -Alvarado explains. Prices are set in dollars, but for a long time this was paid in bolivars. It was never a business for anyone”.
State companies such as Corpoelec, Pequiven, companies associated with the Venezuelan Corporation of Guayana, distribution companies that belong to PDVSA Gas have been the final consumers. Antero Alvarado makes it clear that “there was no real purchase and sale of gas. The producer used to deliver the gas to PDVSA, PDVSA decided if paid it or not, and later the final consumers did not pay PDVSA Gas either. It was a vicious cycle of losses”.
“Any improvement or expansion in the gas service,” he says, “involves breaking that monopoly so that those who produce gas can have a better price and negotiate directly with the final users. If we want to improve electricity service, for example, we should probably start paying better for natural gas so that companies will not go neither bankrupt nor their installed capacity will deteriorate”.
Cartography of defeat
90% of the Venezuelan population cooks with the most expensive and inefficient gas, which is propane or cylinder gas; 7% cooks with free gas or non-associated gas; while 2% uses electric cookers. Democratizing gas access should be the compass of any public policy. Venezuela has gas, but it does not have an infrastructure to exploit and distribute it. There is free gas, but there are no pipelines.
Massing methane is the best gas project that Venezuela could undertake. Let propane be a fuel for the most distant populations, with a realistic subsidy mechanism for those families who live in the countryside.
In 2010 PDVSA had a gasification plan for the entire country. It was estimated that 90% of the population would receive direct gas, however, the plans did not materialize because, in Antero Alvarado’s opinion, these networks tend to grow organically when there are interested private companies.
Today the methane gas leaves the east, passes to Guarico, reaches Altagracia, is diverted to Caracas and the Litoral. There is a branch that continues to Morón, another to Barquisimeto, another to the west and reaches Maracaibo. There is a line to Colombia that was built in 2007 to import gas that Venezuela was already lacking, and it did so until 2015, because in 2016 Venezuela had the highest production. Then it returned to import, but in 2020 it stopped.
There is a huge lack of gas pipelines in the Andes. In Barquisimeto, gas reaches industrial zone III, to Sidetur, but the domestic gas network has not been developed. There are para-municipal companies in Maracaibo, in Caracas there are private companies and PDVSA Gas, and in the east there are a couple of private companies.
In Maturin, where all of Venezuela’s gas is produced, paradoxically there is no domestic gas network. A gas pipeline was made to Margarita, which passes through the island of Coche. It cost a lot of money, but it has not been expanded to hotels, not even to the electricity sector that has had so many problems, because that is a role, according to Alvarado, of the private sector, but PDVSA’s monopoly does not facilitate investments.
All residential gas consumption in Venezuela is 120 MMscfd and, thanks to the leaks in the system, Zulia, with 480 thousand users, consumes 100 million cubic feet per day and costs Pdvsa 15 million dollars; the metropolitan area consumes 15 MMscfd; the rest of the country 2.8 MMscfd. “It is important to attend to the Maracaibo home network. It is a city that can explode due to gas leaks, and that explains why per capita consumption is so high. If those 80 million cubic feet per day that Maracaibo is using more are collected and sold to Colombia, it will be possible to pay for the infrastructure”.
For now, a cylinder in the Caracas Metropolitan Area can cost between $5 and $10 on the black market, but in the interior of the country it can reach $20 and $30, according to Monitor Ciudad. This is the reality that 94% of the population living in poverty, 67% living in extreme poverty and 64.8% surviving in multidimensional poverty cannot deal with, according to data from the Survey of UCAB Living Conditions 2019/2020 published in InsoEncovi.