Venezuela's crude oil proven reserves surpassed those of Saudi Arabia in 2010, according to OPEC's annual statistical bulletin. Venezuela's reserves increased 40% year-on-year to reach 296.5 billion barrels, higher than Saudi Arabia's 264.5 billion barrels. (OPEC normally relies on its members' assessments for its statistical data.) This analysis counts as accessible the extra-heavy crudes in the East Venezuela Basin Province’s Orinoco Belt, a vast area that encompasses approximately 19,000 square miles.

According to Hart Energy's November 2010 Heavy Crude Oil study, the Orinoco Belt (also called Faja) contains about 1.3 trillion barrels of extra-heavy oil in place. The U.S. Geological Survey recently assessed technically recoverable reserves in the Orinoco at 516 billion barrels.

In the long run, OPEC's boost in stated reserves may impact the strategies of members of the group--including Iraq and Iran--that favor higher prices. Iraq's and Iran's proven reserves were also upgraded to 143.1 billion and 151.2 billion barrels, respectively. That was a 24.4% jump for Iraq and a 10.3% increase for Iran.

However, there are doubts over whether all of Venezuela's heavy-oil deposits are actually economically viable due to current production methods. For western nations, political uncertainty is also a concern due to the socialist ideology of the country’s president, Hugo Chavez. In 2005, the government of Venezuela changed the terms of all contracts with foreign oil companies, requiring state firm PDVSA to have a minimum of 60% interest and operating control.

Venezuela is also experiencing intensifying electricity blackouts and declining oil revenues since 2008, which forced the president to devalue his country's currency in 2011.

That said, plans for expanding Orinoco Belt production seem to be moving ahead. In 2010, Venezuela awarded several new Orinoco projects to various consortiums of national and international oil companies. These included Junin Blocks 4, 5 and 6, which went to CNPC (Chinese National Petroleum Co.), ENI, and a consortium of Russian companies, respectively. Two blocks in the Carabobo area were awarded – Block 1 to Repsol YPF and Block 3 to Chevron.

Hart Energy forecasts that production from the Orinoco Belt could grow from 680,000 barrels a day in 2010 to 1.67 million barrels a day in 2020, given the new projects.

Contact the author, Larry Prado, at lprado@hartenergy.com.