Satellite images reveal Venezuela’s massive methane problem

Oil executives weighing a potential investment in Venezuela’s fields may want to check out the view from space. Satellites have detected enormous amounts of methane billowing from the country’s abandoned oil rigs, rusty pipelines and other dilapidated energy infrastructure.

The emissions not only reflect potential lost revenue — they’re also likely to give US oil majors pause about operating in Venezuela. That could leave smaller, less experienced companies and private equity firms to attempt to fulfill US President Donald Trump’s plan to revive the nation’s heavy crude output after capturing President Nicolas Maduro.

Recurring emissions are a “red flag” to oil and gas operators, said Clayton Nash, director of strategic development at Tegre Corp., a Colorado-based engineering and design consultancy. “That’s one way that you’re going to know that you’ve got facilities that are not operated well.”

Roughly 13 billion cubic meters of Venezuela’s natural gas is flared, vented or leaked into the atmosphere every year, wasting about $1.4 billion of potential revenue, according to Capterio Ltd., a British company that helps to reduce such emissions. About a quarter of Venezuela’s gas output is lost to the atmosphere, the highest rate in the world and nearly 10 times above the global average, according to a satellite analysis published last month in Nature Communications. All that methane is dangerous: The greenhouse gas is 80 times more potent than carbon dioxide at warming the planet over a 20-year period.

Much of Venezuela's methane emissions problem stems from natural gas that is produced alongside more valuable oil. Petroleos de Venezuela SA, the state-run oil company, doesn't have enough pipelines, storage facilities or a liquefied natural gas export facility to capture and transport the extra fuel. So the gas is flared, vented or simply leaks away.

Venezuela’s giant and persistent methane plumes also indicate that what infrastructure exists is rapidly declining and leaky, following years of underinvestment, lack of maintenance and theft. Satellites have detected large methane clouds in several major production areas, including the Orinoco Belt near Maturin and Lake Maracaibo, according to BloombergNEF.

That highlights one of the main challenges facing any operator considering investing in the country, where existing systems may be expensive to fix and require extensive upkeep for decades.

“Venezuela’s fields will not only need an overhaul but also require careful operational management and oversight long into the future,” said Deborah Gordon, senior principal at RMI’s Climate Intelligence Program. “Even if the operators can successfully stop gas from being wasted and lost, their extra-heavy resources in the Orinoco Belt will remain major sources of CO₂ pollution.”

Restoring the nation’s production levels to near its peak of almost 4 million barrels a day won’t come cheap. Companies would need to invest about $100 billion over the next decade to achieve that level of output, according to Francisco Monaldi, director of Latin American energy policy at Rice University’s Baker Institute for Public Policy.

The White House has summoned US oil bosses for a crucial meeting in Washington on Friday to turn Trump's vision of resurrecting Venezuela's oil output into reality. The pitch, one person familiar said, will be: “Do it for our country.” But multiple analysts have pointed out that concerns about Venezuela's long-term political stability and history of nationalizing foreign-owned assets may be a deterrent for Big Oil.

“We anticipate that large, publicly traded US and European majors will remain hesitant given their checkered history in the region,” said Quentin Peyle, lead analyst at French geoanalytics firm Kayrros SA. “Instead, investment will likely come from smaller operators with a higher risk appetite.”

But smaller producers often struggle to reduce operational emissions without strong policy incentives, and they are less likely to bring the large-scale investment required to completely transform the infrastructure. Another concern: Any improvements that do reduce emissions might be offset by an uptick in production, said Peyle.

Potential investors would need to do extensive due diligence on existing infrastructure, but it might be difficult to fully assess the risk because it's been operating at low capacity for years.

“You might have those sort of ticking time bombs,” said Tegre’s Nash. “ You’re not going to find out how bad things are until you ramp up production.”