Venezuela gas complex blast hits heavy crude dilution; power production: report

Production of light crude, upgraded heavy oil and natural gas in Venezuela's eastern fields will be severely compromised until at least February after an explosion and resulting fire destroyed a network of gas pipelines and high-pressure pipes at the country's Muscar gas complex, according to a preliminary damage report from state oil and gas company PDVSA and an official with the company.

"This accident has been qualified as 'catastrophic,' because it destroyed strategic PDVSA gas and oil production infrastructure," said the PDVSA official, who spoke on condition of anonymity.

The explosion and fire started in the 26-inch Muscar-Soto gas pipeline, located in the Muscar complex, a storage and treatment center for associated gas from oil fields of northern Monagas state, such as Punta de Mata and El Furrial. Light oil production in the northern Monagas fields was 150,000 b/d in October, according to previous reports.

"The explosion, followed by a fire, occurred in the facility known as the "multiple" that receives and dispatches natural gas to PDVSA's system, through pipelines that reach up to 1,200 lb of pressure, to the Santa Barbara and San Joaquin liquid extraction plants and to the Muscar compression plant, which is located very close to the site of the accident," said the preliminary report, seen Nov. 18 by S&P Global Commodity Insights. "Within the same complex is the Pigap I plant, which is also out of service.

"On the surface there is considerable damage to the gas manifold, where concealed damage is not ruled out," the report said. "Very close to the manifold is the Muscar compressor plant, which most likely suffered some damage from the fire and the expansion of the explosion."

"A lot of reconstruction work has to be done on new gas pipelines," the PDVSA official said. "An important network of gas pipelines was damaged, there is damage to the electronics, to the instrumentation that accompanies that operation, there may be hidden damage, everything around that installation that exploded must be reviewed."

The explosion and fire directly affects upstream production in the oil zones of Punta de Mata and El Furrial, where Santa Barbara and Mesa 30 light oil are produced. They are used by PDVSA to dilute extra-heavy crude produced in Venezuela's Orinoco Belt and for processing in local refineries.

"As the supply of diluents such as light crude is affected, production of upgraded crude from the Orinoco Belt is also affected," the preliminary report said.

'Considerable' downstream gas impact

While data on the lower production in the Orinoco Belt was not available, the PDVSA official said the company "ordered drastically lower crude oil production, while emergency measures were implemented to mitigate the impact of this accident."

Although PDVSA's immediate focused is on the removal of debris and determining the causes of the explosion, PDVSA is studying some measures to mitigate its impact on crude production.

"This contingency merits a quick solution to continue producing this light crude for the Orinoco Belt, but it depends on industrial safety factors," the PDVSA official said. "Portable gas flares can be installed in the flow stations and burn that associated gas that was being sent to the Muscar complex."

The downstream gas impact is also "considerable," the official said.

"This plant handles 65% of the natural gas supply to the whole country -- 850 million-1 Bcf/d," he added.

According to the preliminary damage report, as a result of this gas shortfall, the following are all out of service: the gas-fired power plants in Anzoátegui, Sucre and Nueva Esparta states; the Jose Petrochemical Complex; the Metor I, Metor II and Fertinitro petchems plants; the fractionation and liquid extraction plants associated with the Muscar complex, such as San Joaquín and Santa Bárbara. The supply of gas to Guayana's basic companies has also been paralyzed.

The level of gas production associated with crude oil production in the Venezuelas' Oriente also fell.

"Before the explosion about 2.3 Bcf/d was being produced, after the explosion it dropped to 500 million, a drop of 78%," the report said. "This drop is not directly proportional to crude oil production but it is quite considerable."