Venezuela oil flow sags, Iran offers more help
Venezuela's crude production entered November on a downswing after the US banned non-US companies from crude-for-diesel swaps at the end of October.
Output was slipping below an October average of 350,000 b/d as Spain's Repsol, Italy's Eni and India's Reliance stopped crude liftings and low-sulfur diesel supply that had previously been permitted under the US sanctions, Venezuelan oil industry sources told Argus.
The diesel cut-off has left Venezuela's state-owned PdV with few export options and nearly replete storage, a pattern repeated over the course of the nearly two years since the US imposed the oil sanctions in January 2019. Crude exports in October plunged to roughly 350,000 b/d, half of the September level.
Among PdV's joint ventures that are still partially operating is PetroPiar, a heavy crude upgrading project in which Chevron holds a 30pc stake. The 170,000 b/d upgrader, based in the eastern industrial complex of Jose, is producing around 65,000-70,000 b/d of synthetic crude.
Chevron and a handful of US-based oil services companies remain in Venezuela under a restricted sanctions waiver that the US government is expected to renew again when it expires on 1 December, regardless of the outcome of the tense US presidential race currently in play.
Into the woods
The Venezuelan government of President Nicolas Maduro routinely blames the sanctions for the national oil industry's decline, most acutely reflected in a gasoline shortage. PdV's efforts to repair its 305,000 b/d Cardon refinery, one part of its mostly broken 1.3mn b/d refining system, have largely stalled.
Another gasoline supply respite could be on the horizon, after Iran's foreign minister Javad Zarif met with his Venezuelan counterpart Jorge Arreaza and Maduro yesterday in Caracas. Iran shipped gasoline to Venezuela in May-June and again in September-October, briefly alleviating a severe deficit that has fortified a black market controlled by Maduro loyalists, a trend that could now extend to increasingly scarce diesel as well.
The US recently impounded Iranian oil cargoes aboard Liberia-flagged, Greek-owned tankers that it claimed were en route to Venezuela, but it did not stop the gasoline and alkylate shipments that came directly from Iranian state-owned NIOC aboard Iran-flagged vessels.
For most Venezuelans, the most pressing fuel shortage is for LPG, which is traditionally used for cooking. The supply gap has widened because of PdV's impaired natural gas production and fractionation infrastructure in eastern Venezuela. Electric hotplates to which many residents have resorted often short-circuit because of choppy electricity service, a problem that the diesel cut-off and associated blowback on Repsol and Eni's offshore gas production are likely to aggravate. The combination of fuel shortages has created an unprecedented market for firewood, which is selling for as much as $4/cord.
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US reimposes Venezuela oil sanctions
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The US' decision reopens the door for Chinese independent refiners to procure Venezuelan Merey at wide discounts to other crude grades, writes Haik Gugarats Washington, 25 April (Argus) — The US administration reimposed sanctions targeting Venezuela's oil exports and energy sector investments on 17 April, and set a deadline of 31 May for most foreign companies to wind down business with state-owned oil firm PdV. The decision rescinds a sanctions waiver issued in October, which allowed Venezuela to sell oil freely to any buyer and to invite foreign investment in the country's energy sector. The waiver was due to expire on 18 April, with an extension dependent on Caracas upholding a pledge to hold free and fair elections. Venezuelan president Nicolas Maduro's government reneged on that deal by refusing to register leading opposition candidate Maria Corina Machado or an alternative candidate designated by her, a senior US official says. The US considered the potential effects on global energy markets and other factors in its decision but "fundamentally the decision was based on the actions and non-actions of the Venezuelan authorities", the official says. China's imports of Venezuelan Merey — often labelled as diluted bitumen — decreased following the instigation of the waiver in October. Independent refiners in Shandong previously benefited from wide discounts on the sanctioned crude, but they drastically cut back their Merey imports as prices rose. Meanwhile, state-controlled PetroChina was able to resume imports under the waiver. The reimposition of sanctions this month was widely expected and Merey's discount to Ice Brent began to widen in early April, before the decision was announced. Merey's discount to Brent averaged $9/bl in March, but had reached $12/bl by the start of April and $13/bl after the reimposition of sanctions was formally announced. Buyers are expecting final deals for May at discounts of $14/bl or lower, and for prices to drop by a further $3-4/bl in the short term. Longer-term prices for Merey will be influenced by supply and prices for Iranian crude — another mainstay of Shandong independents. Venezuela's crude output reached 850,000 b/d in March, up by 150,000 b/d on the year, according to Argus estimates. PdV has begun looking to change the terms of its nine active joint ventures with international oil companies, in an effort to keep production elevated now sanctions are back in place. Chasing the deadline The end of the waiver will affect Venezuela's exports to India as much as those to China. India emerged as a major destination for Venezuelan crude after sanctions were lifted, importing 152,000 b/d in March. Two more Venezuelan cargoes are expected to arrive in India before the 31 May deadline. The 2mn bl Caspar left Venezuela's Jose port on 14 March and is expected to arrive in India on 26 April, and Suezmax vessel Tinos is due at India's Sikka port on 30 April. Separate sanctions waivers granted to Chevron and oil field service companies Halliburton, SLB, Baker Hughes and Weatherford will remain in place. Chevron can continue lifting oil from its joint venture with PdV, solely for imports to the US. Oil-for-debt deals between PdV and Spain's Repsol and Italy's Eni are expected to be allowed to continue. Repsol imported 23,000 b/d of Venezuelan crude into Spain last year and 29,000 b/d so far this year, according to data from oil analytics firm Vortexa. And a waiver enabling a Shell project to import natural gas from Venezuela's Dragon field to Trinidad and Tobago is expected to remain in place. The US says it would consider other requests for sanctions waivers for specific energy projects. It will consider lifting sanctions again if Maduro's government allows opposition candidates to participate in the July presidential election. The resumption of sanctions "should not be viewed as a final decision that we no longer believe Venezuela can hold competitive and inclusive elections", a US official says. Chinese imports of Venezuelan crude Venezuelan crude exports Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
LNG Energy eyes sanctions-hit Venezuela oil blocks
LNG Energy eyes sanctions-hit Venezuela oil blocks
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US economic growth slows to 1.6pc in 1Q
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