PdV´s money woes chip at Caribbean assets
Caracas, 15 June (Argus) — Venezuelan state-owned oil company PdV´s financial woes are chipping away at its Caribbean storage and refining assets that are critical to exporting the country´s vast extra-heavy crude reserves, mainly to China and India.
PdV said the early termination of a Bahamian crude and products storage lease with Buckeye Partners was motivated by a board decision to consolidate its Caribbean storage, blending and refining operations in fewer facilities.
A Caracas-based tanker broker said PdV's decision to end the contract and move millions of barrels of crude and products currently stored at the Buckeye Bahamas Hub terminal to NuStar Energy's storage terminal at St. Eustatius was "financial, not strategic."
"PdV missed several payments to Buckeye since early 2016, which disrupted some shipments to PdV clients when Buckeye retained crude in Bahamas storage until PdV made the late payments," the broker said.
Buckeye in May said it was converting some storage space from crude to jet fuel and expected lower utilization in the current quarter after failing to reach an agreement with a long-term customer, but declined to identify the company.
Market participants say PdV is likely to further reduce its near-shore logistics capabilities as weak oil prices and sliding crude production slash revenue.
One possible target for divestment is PdV´s Bopec terminal and storage facility on Bonaire, which is part of the Netherland Antilles that includes Curacao, Aruba, St. Maarten and St. Eustatius.
PdV and energy ministry officials charged with maximizing the company's revenues and cutting costs have discussed the possibility of leveraging Bopec's assets to raise cash, or sell the facility outright, a ministry official tells Argus.
The Bopec terminal, wholly owned by PdV, operates as a storage and transshipment facility for up to 12 mn bl of various grades of crude and refined products received from Venezuela and the PdV-operated Isla refinery in Curacao. Bopec has two T head jetties with shore tanks capable of handling tankers up to 500,000t at Jetty 1 and 135,000t at Jetty 2.
PdV said it currently has no plans to sell Bopec. But the facility appears to be in the sights of Chinese companies, possibly piggybacking on Chinese state-owned Guangdong Zhenrong Energy's deal with Curacao to assume operational control of the 335,000 b/d Isla refinery when PdV's current lease expires in 2019.
PdV's contract with Buckeye, originally set to expire in December 2017, was for up to 6mn bl of crude and fuel oil. PdV expects to recover about $10mn on the terminated Bahamas storage lease with Buckeye, an energy ministry official told Argus.
PdV's three-year St. Eustatius storage contract with NuStar Energy, in effect since March 2017, covers up to 5mn bl of crude storage for a monthly fee of $2.3mn, the ministry said.
PdV also secured an option to lease additional storage capacity of up to 4.3mn bl and a single buoy mooring at NuStar Energy's terminal, the official added.
The St. Eustatius terminal has 13.03mn bl of crude and products storage capacity, plus six mooring points, crude blending and transshipment infrastructure.
But if cash-starved PdV's revenue stream does not improve the company "probably will have problems staying current on lease payments at NuStar's Statia terminal, causing more disruptions in shipments to its clients," the tanker broker said.
In the meantime, PdV is likely to struggle to meet its commitments. "PdV's Caribbean operations are shrinking because it is financially unable to pay the owners of the terminals, tankers and other logistics assets needed to transport, transship and blend crude," the tanker broker said.
"Venezuelan oil exports currently selling below $45/bl would not be a problem per se if PdV also had not lost 1mn b/d of upstream crude output capacity since 2006," the broker said.
PdV's lost production capacity, caused by a lack of core upstream investment, "is the dagger in PdV's heart driving the company's operational collapse," former PdV upstream manager Diego Gonzalez tells Argus.
PdV's crude output in May 2017 as reported directly to Opec by the energy ministry was 2.189mn b/d, down 1.061mn b/d or almost 30pc in the past decade. Secondary sources used by Opec to monitor compliance with coordinated production cuts in effect since January 2017 put Venezuela's crude output in May at 1.963mn b/d.