Tar belt oil in Venezuela could be like 'open sesame'

By , Latin America correspondent of The Christian Science Monitor

The time is fast approaching when Venezuela's remarkable 50-year oil bonanza comes to an end -- as long-worked oil fields yield up less and less of the petroleum that has fueled the country's economic growth surge.

By 2000, most of the fields now being exploited will have run dry.

And so what do Venezuelans do next?

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They scout for more oil -- and they appear to have found it in the molasses-like tar belt of the Orinoco River basin.

Tapping this region of eastern Venezuela has been talked about for years, but it often seemed like a wistful pipe dream. Costs were seen as prohibitive. Technology to get the oil out of the rocks and tar of the area was limited.

Now, however, with world oil prices escalating and with new technology available, the whole project becomes economically feasible and practical, and the government of President Luis Herrera Campins is about to commit almost $20 billion to the concept.

Within weeks, a pilot project involving specially designed oil wells and an experimental plant to test ways to extract the heavy crude goes into operation.

But that is only the beginning. Soon afterward, the state-owned Lagoven petroleum company will select a foreign firm from among numerous bidders to develop and coordinate the whole project.

At the moment, speculation here centers on the Bechtel Company of San Francisco as the likely winner of the contract.

But the whole project, including the selection of a foreign firm to coordinate it, is under attack by various Venezuelan nationalists who argue that:

* Not enough is known about the tar belt to enter into oil extraction at this time.

* And anyway conservation of Venezuela's single most important nonrenewable resources should be fostered.

* Selection of a foreign company, whether US-owned or otherwise, would take Venezuela back to the days when the foreign oil giants controlled the country's petroleum industry.

Actually, that is not too far back. Oil was nationalized four years ago when Exxon (working here as Creole Petroleum Company), Shell, Mobil, Gulf, and half a dozen other firms were involved in both the extraction and sale of petroleum in Venezuela.

Nationalization won support from most Venezuelans. But the start-up problems in the tar belt lead many Venezuelans to argue, as the government does, that outside expertise is needed in tackling a project of this magnitude.

At the same time, the return of foreign firms, even if they are not oil companies per se, in the development of a petroleum project is naturally a troublesome issue.

But despite the criticism and the touchiness of the subject, the general feeling is the government will move ahead with considerable speed to get the tar belt project under way.

"There is no need for delay," says a top official of the nationalized petroleum industry. "We've only got about 20 years of oil from other sources and this project (the tar belt) will take a decade to get fully functioning. So we don't have too much time."

The exact size of the belt is not known. But it probably stretches 400 miles paralleling the Orinoco River and running 50 miles or so deep. To many Venezuelans, this looks a little like "open sesame," as a newspaper here said recently.

The tar belt tends to assure most Venezuelans that their love affair with gasoline, which fuels their gas-guzzling cars, will continue.

As far as conservation is concerned, most Venezuelans ignore the issue. With probably the cheapest gasoline in the world, protected by a $4.65 million a year government subsidy to keep prices down, many Venezuelans never give a second thought to the fast approaching depletion of present oil fields.

Venezuelan authorities, meanwhile, are planning to increase the gas price soon. They wince when reminded that gasoline is cheaper here than bottled water.

"Not for long," says an official of one of the former US oil companies. "We will up the price soon to help cut back on the subsidy which in turn should help in the development of the tar belt."

Unanswered here are questions about how the oil from the tar belt will be distributed. Venezuela currently supplies huge quantities of fuel oil to heat the homes of Eastern Seaboard of the United States northeast and corresponding areas of Canada. The continued sale of this oil for the next 15 or so years seems assured -- and given Venezuela's need for export earnings to fuel its own development, the continuing sale, whether of the tar belt product of other sources, is likely to continue indefinetely, even though there may be some nationalist objections here.

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