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Venezuela to pledge more oil reserves for credit

  • : Crude oil
  • 18/07/27

Venezuela launched a new currency backed by the government's "petro" instrument and granted oil reserves to the central bank in a bid to secure fresh credit from abroad.

The "sovereign bolivar" will start circulating on 20 August, Venezuelan president Nicolas Maduro said during a 25 July nationally televised meeting with his cabinet and senior officials of the ruling socialist party (PSUV) to discuss ways of stabilizing the oil-based economy.

The new "sovereign bolivar" will erase five zeros from the "strong bolivar" that was launched in 2007 by late president Hugo Chavez in what ultimately was a failed bid to check the depreciation of the national currency.

Maduro also granted Venezuela's central bank 29bn bl of "certified crude reserves" in the Orinoco oil belt. These reserves will be offered by the bank as guarantees to secure new loans from Russia, China, Turkey and India, a presidential palace official told Argus.

On paper, the government is valuing the 29bn bl of "certified" reserves at about $1.9 trillion calculated at a rounded current average export price of $66/bl.

Critics have long accused the government of effectively mortgaging Venezuela's oil assets to stay in power. State-owned PdV's US refining subsidiary Citgo is already pledged to PdV bondholders and Russia's state-controlled Rosneft.

Both the new currency and the reserves-for-credit plan sparked overwhelming rejection from economists, business groups and labor union officials.

The implications of the sovereign bolivar's launch next month for PdV's oil operations, including over 40 upstream joint ventures with foreign partners, are not immediately clear. But payments for salaries and local goods and services are already clouded by hyperinflation, exchange rate ambiguity and a shortage of banknotes.

Maduro's decision to give the bank administrative control of untapped oil reserves to leverage fresh international loans appears to be an effort to skirt US financial sanctions imposed in August 2017. The US sanctions have blocked PdV's access to international credit, aggravating its struggle to reverse sharply declining production.

The proceeds of any new loans secured by the central bank could be accessed by state-owned companies that need hard currency to finance investments. These companies include PdV, state-owned petrochemicals producer Pequiven, state-owned utility Corpoelec, an energy ministry official tells Argus.

But a disgruntled senior central bank official dubbed the government's plans to launch a new currency and turn the central bank into an international borrower a "desperate doomed attempt" to reverse the Opec country´s economic debacle.

"Undeveloped oil reserves owned and controlled by the Venezuelan state are not liquid, therefore they are not tradable and cannot be leveraged constitutionally for purposes of incurring new debt and cannot be monetized as hard currency like gold bullion for purposes of reporting the country's hard currency reserves," the bank official said. .

Former central bank chief economist José Guerra also maintains that the sovereign bolivar is unviable. "A bus ride now costs 20 centimos (cents) priced at the new sovereign bolivar's rate, and gasoline costs 0.0001/liter, but the lowest denomination coinage in Venezuela is 50 centimos," Guerra said. Pegging the sovereign bolivar to the petro is also impossible "because the petro doesn't exist, it isn't accepted as a currency."

The petro, unveiled earlier this year, is an ambiguous financial instrument pegged to Venezuela's oil export price basket and backed officially by over 5.2bn bl of undeveloped extra-heavy crude reserves in the Ayacucho 1 block of the Orinoco oil belt. Each petro equals the market value of one barrel of the untapped reserves based on the weekly average price of the oil energy's oil export basket, according to Maduro.

The Maduro government claims the petro has been well received abroad, with PdV, Corpoelec and other government entities now using the instrument for all financial transactions. Commercial airlines and shipping companies also have been ordered by the Maduro government to use it.

But over a dozen local executives with foreign airlines and shipping companies say Venezuela's government and PdV continue to conduct foreign financial and commercial transactions in US dollars and euro.

Currently the only global financial institution that appears to accept the petro is Evrofinance Mosnarbank, a shadowy Russian-Venezuelan quasi-public financial institution in which Venezuela's state-owned National Development Fund (Fonden) holds a 49.99pc stake. The remaining 50.01pc stake is divided equally between Russian banks Gazprombank Group and VTB.

In an additional development, Maduro suspended all taxes for one year on imports of capital goods associated with industrial production, and pledged to reform existing money-laundering legislation to lessen legal risks for legitimate importers. He offered no details on how these proposals would work in practice.

Independent Venezuelan economists forecast that Venezuela's GDP will shrink by up to 22pc in 2018, extending the cumulative economic contraction since Maduro came to power in April 2013 to over 50pc.


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Small private Libyan firm exports oil through blockade


24/09/19
24/09/19

Small private Libyan firm exports oil through blockade

London, 19 September (Argus) — A small Libyan private firm appears to have been granted an exemption from an oil blockade, which has more than halved the country's exports. Arkenu Oil, which describes itself as a private oil and gas development and production firm, is scheduled to export 1mn bl of Sarir and Mesla crude from Marsa el-Hariga to Italy's Trieste on the Maran Poseidon, according to an official document seen by Argus . The tanker has been chartered by Turkish trader BGN and is currently loading its cargo. This is the first Arkenu shipment set to be exported since the country's eastern-based administration ordered a blockade on oil fields and terminals on 26 August in response to an attempt by its rival administration in the west to replace the central bank governor. It is also Arkenu's third known shipment since July. Arkenu exported a 1mn bl cargo on the Zeus on 10 July and another 1mn barrel cargo on the Yasa Polaris on 16 August, according to official documents and ship-tracking data. These were also Sarir and Mesla grade. Arkenu's exports are significant given that crude sales have historically been the preserve of NOC and a handful of international oil firms that hold stakes in the country's upstream such as Eni, TotalEnergies and OMV. Arkenu, which is based in the eastern city of Benghazi, is supposedly able to export its own crude based on an agreement with NOC which allocates it an unspecified share of production from its subsidiary Agoco's Sarir and Mesla fields in return for carrying out work to boost output at the sites. But there remain questions related to the legality of the deal, the nature of the work Arkenu is supposed to be carrying out and the company's technical capabilities. The three known Arkenu cargoes are worth around $240mn at prevailing market rates, Argus estimates. There has been no increase to Agoco's production capacity since the Arkenu deal was struck, one Libyan oil industry source said. Sarir and Mesla accounted for most of Agoco's roughly 280,000 b/d output in 2023. Arkenu and NOC have yet to reply to a request for comment. "The Haftar family is deliberately and selectively allowing crude exports that generate dollars outside the Libyan state, and they are doing so within the context of a blockade they imposed," said Jalel Harchaoui, a Libya specialist at the UK's Royal United Services Institute. "While the Libyan state struggles to figure out how to import food and medicine next month owing to the central bank crisis, the Haftars' strange oil blockade permits crude exports that profit a private Libyan entity," Harchaoui added. The leadership crisis at the central bank has degraded Libya's ability to carry out international financial transactions. "The only beneficiary from these Mesla and Sarir sales is an unknown private Libyan company with an account in Switzerland and the UAE, with zero dollars being deposited in the state," the oil industry source added. General Khalifa Haftar's Libyan National Army (LNA) controls the country's east and southwest and is the real force behind the blockade. Haftar is understood to be allowing some exports to continue as long as these revenues do not reach the central bank in Tripoli, which is controlled by the rival administration in the west. Libya's crude exports have averaged 410,000 b/d so far this month, according to Kpler. While this is well below pre-blockade levels of around 1mn b/d, it is well above levels seen in some past blockades. Rising exports in recent days suggests Libya's total crude production has picked up from an earlier Argus estimate of around 300,000 b/d to possibly around 500,000 b/d. Libya was producing 1mn b/d before the blockade. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Citgo auction result delayed amid last-minute motions


24/09/18
24/09/18

Citgo auction result delayed amid last-minute motions

Houston, 18 September (Argus) — The US court-appointed special master overseeing the auction of US refiner Citgo plans to object to a last-minute motion from the Venezuelan government to delay the sale process by four months. The Republic of Venezuela and state-owned oil company PdV filed a motion on Tuesday seeking a four-month pause in the sale of its refining subsidiary Citgo, which is being auctioned off to satisfy debts owed by PdV. Special master Robert Pincus said in a court filing today that he intends to object to Venezuela's motion for a pause. The last-minute motion from Venezuela comes days after the US District Court for the District of Delaware was expected to announce results of the winning bidder. The court asked for a second extension to the auction process in August, delaying announcing a successful bidder to on or about 16 September with a sale hearing on 7 November. But Pincus is now dealing with last-minute legal challenges filed last week outside of the Delaware courts by so-called "alter ego" claimants seeking to "circumvent" the Delaware court's sales process and "jump the line" for enforcing claims against PdV, the special master said in a filing last week. Bidders for Citgo's 804,000 b/d of refining capacity, terminals, retail fuel stations and other plants expect the assets to be sold free and clear of future claims by PdV creditors. Unresolved legal liabilities could lower the value bidders are willing to pay for Citgo, decreasing the pool of money available to those owed by PdV. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US seeks to purchase 6mn bl for SPR


24/09/18
24/09/18

US seeks to purchase 6mn bl for SPR

Washington, 18 September (Argus) — President Joe Biden's administration is trying to purchase 6mn bl of sour crude for delivery to the US Strategic Petroleum Reserve (SPR) as part of a plan to issue solicitations when prices are "favorable for taxpayers." The US Department of Energy (DOE) today released a solicitation to purchase up to 6mn bl of sour crude for delivery in February-May to the SPR's Bayou Choctaw site in Louisiana. If the purchase is successful, it would be the largest single purchase since the Biden administration launched its crude purchase program in early 2023. The solicitation offers a chance for the administration to buy crude for the SPR at a lower price than earlier purchases. Nymex WTI crude futures for delivery in February settled at $68.41/bl on Tuesday. The lowest-priced crude purchase under Biden was a 1.7mn purchase at a price of $72/bl in June 2023, and the average purchase price is about $76/bl. Bids for the solicitation are due by noon ET on 25 September. DOE has already purchased more than 50mn bl of sour crude for the SPR, of which 30mn bl have already been delivered. On 9 September, DOE said it purchased 3.42mn bl of sour crude for the SPR's Bryan Mound storage site at a price of $72.46/bl from the trading firm Macquarie Commodities Trading. The crude will be delivered in January-March, adding to an earlier purchase of nearly 2.5mn bl that will be delivered to the Bryan Mound site over the same time frame. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

TMX is a fossil fuel subsidy of at least C$8.7bn: IISD


24/09/18
24/09/18

TMX is a fossil fuel subsidy of at least C$8.7bn: IISD

Calgary, 18 September (Argus) — Canada's newest crude pipeline to the country's west coast amounts to a fossil fuel subsidy of at least C$8.7bn ($6.4bn), a research and policy think-tank said. The federal government is unlikely to recover its C$34bn investment to construct the 590,000 b/d Trans Mountain Expansion (TMX) connecting oil producers in Alberta to the Pacific coast, qualifying the project as a major subsidy for the fossil fuel industry, according to the International Institute for Sustainable Development (IISD) on Wednesday. This runs contrary to the government's policy to eliminate direct support for the oil and gas sector , a goal Justin Trudeau's Liberals said was achieved in 2023. The government was the first G20 country to hit this milestone, following a 2009 commitment by the group to reach the goal by 2025. The subsidy as it relates to TMX could be as high as C$18.7bn, the Canadian non-profit said, but noted the entire amount could still be recovered by increasing tolls and/or implementing a levy. This levy could be against either all producers, or all shippers, of crude in the Western Canadian Sedimentary Basin (WCSB), whether they use TMX or not, the IISD suggested. About 90pc of Canada's crude production comes from western Canada, with much of that derived from Alberta's oil sands region. "A levy in the range of C$1-2/bl . . . over a 10-year period would be sufficient to recover the entire cost of the subsidy and the loss to the Canadian taxpayer," according to the IISD. Alternatively, fixed tolls on TMX would need to be more than doubled to C$24.53/bl from C$11.37/bl to recover all capital costs for the line that went into service on 1 May this year, according to IISD's figures. Variable tolls would be added to this. The terms in the original contracts signed between shippers and then-owner Kinder Morgan were no longer appropriate as they did not reflect the rising risks of the project, said the IISD. Kinder Morgan suspended the project in 2018, which led to the Canadian government buying both the expansion project and the original 300,000 b/d Trans Mountain line from US midstream company that same year. The federal government has maintained its plan to sell the pipeline once operational, but the final tolls are yet to be determined. Whether the operator or shippers will bear the brunt of the massive cost overruns is also still unknown. Tolls, representing cash flows for any prospective buyer, will help dictate the price that the expanded Trans Mountain system will fetch. The IISD suggests a sale price is likely to be between C$17.6bn-26.6bn, resulting in a net loss to the government of between C$8.9bn-18bn assuming its cost of investment climbs to nearly C$36bn before a sale is reached. But despite warnings by opponents it would go underused, TMX has been as advertised, opening a new frontier for oil sands operators and disrupting trade flows throughout the Pacific Rim. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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