The US Treasury Department's new license for Venezuela to import LPG is unlikely to have a significant impact on trade flows from the US, at least in the near term.
The general license, issued yesterday, does not allow Venezuela to swap LPG imports for crude, as it did with non-US companies for diesel before the previous US administration shut down the arrangement in late 2020. Forced to pay cash, the Venezuelan government may have little immediate incentive to direct scarce resources to LPG despite an acute shortage. Most Venezuelans rely on propane canisters for cooking.
In 2018, the year before the US imposed oil sanctions on Venezuela, the Opec country imported a monthly average of 238,000 bl (20,000t) of US propane, according to US Energy Information Administration data. Traders including Vitol, Carib LPG, Trafigura and Geogas supplied Venezuela out of US terminals as part of regular Central American and Caribbean routes.
Even though they are cleared to resume the business, US traders examining the measure now say Venezuela's lack of credit-worthiness remains a key concern. Although LPG was never explicitly banned under the January 2019 oil sanctions, suppliers shied away from Venezuela business in cautious over-compliance.
Another impediment to the resumption of US LPG supplies to Venezuela is a tight US propane market. Inventories are so tight — 24pc below year-ago levels following months of strong export demand — that this month Enterprise Products Partners, operator of the largest US export terminal in Houston, repurchased some of its own August-loading cargoes out of the international spot market.
As a result, the availability of incremental spot cargoes out of the US has shrunk. Terminals are charging higher prices for spot cargoes, at or above Mont Belvieu +6¢/USG.
Venezuela used to be self-sufficient in LPG, deriving most of its supply from the gas processing and fractionation complex at Jose. Deteriorated infrastructure and chronic breakdowns at facilities run by state-owned PdV and its subsidiary PdV Gas have left a deficit of as much as 40,000 b/d in the residential sector alone, forcing many Venezuelans to cook with electric hot plates or firewood instead.
Although neither Caracas nor its traditional US suppliers are likely to jump into the LPG trade right away, the Venezuelan government may look to replenish stocks ahead of local elections in November to get a leg up on its opponents.
