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Maduro threatens to permanently halt US crude exports

29 Nov 2017 14:30 GMT
Maduro threatens to permanently halt US crude exports

Caracas, 29 November (Argus) — Venezuela's government is willing to halt crude exports to the United States at any time and divert oil currently sent to US Gulf Coast refiners to clients in Asia, mainly China and India.

President Nicolas Maduro said at the swearing-in ceremony for new energy minister and PdV chief executive general Manuel Quevedo late yesterday that the state-owned oil company "is willing" to retaliate against Washington's "financial persecution" of Venezuela by permanently suspending oil exports to the US.

"The day (the US) doesn't want us to sell our crude to them we will have no problem selling all of our oil in Asia," Maduro said.

"You decide, Mr. Donald Trump: If you want us to continue selling oil (to the US), we will sell oil. But if you let crazy rightwing extremists whisper in your ear against Venezuela, then Venezuela will take its little boats and sell its crude just the same anywhere in the world," Maduro said.

PdV currently exports about 750,000 b/d of its crude output of 1.863mn b/d mainly to US Gulf Coast refiners. PdV's US refining subsidiary Citgo operates 625,000 b/d of Gulf coast refining capacity.

Local demand absorbs about 500,000 b/d, and the remaining roughly 613,000 b/d are exported under preferential supply deals and oil-backed debt payments that generate little or no revenue for PdV to clients including Cuba, China and Russia.

Maduro's threat that PdV may halt all crude exports to the US is meant to pressure Washington to lift financial sanctions against PdV imposed in August 2017, the presidential palace told Argus.

US financial sanctions are currently in effect against Venezuela and more than four dozen Venezuelan nationals charged with human rights abuses, money laundering and abetting international drug trafficking. The sanctions are blocking the Maduro government's efforts to restructure up to $70bn in sovereign and PdV bond debt, a palace official said.

Venezuela's government and PdV currently are in default on over $1.5bn of past-due interest payments that were scheduled for payment in October. Maduro maintains the funds were disbursed by Caracas but have been retained illegally by paying agents in Europe worried about the potential legal liability of violating the US sanctions.

The financial sanctions against Venezuela also are hindering PdV's efforts to negotiate new agreements with its foreign joint venture partners and oil services companies aimed at reversing Venezuela's imploding upstream crude output, the energy ministry told Argus.

Maduro yesterday ordered new energy minister and PdV chief executive Quevedo to raise PdV's upstream output by at least 1mn b/d in the shortest possible time. Oil exports generate up to 96pc of Venezuela's annual hard currency revenue.

But PdV's principal oil services contractors including companies like Halliburton, Schlumberger, Weatherford International and Baker Hughes are finding it increasingly difficult to operate in Venezuela because of the impact of the US sanctions, combined with their inability to collect over a combined $2bn owed by PdV for services provided from 2015-17.

PdV owes oil services firm, contractors and suppliers over $19bn, more than doubling Venezuela's central Bank hard currency reserves of about $9.5bn.