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PdV shutting down upgraders to ease export bottleneck

12 Jun 2018 22:17 (+01:00 GMT)
PdV shutting down upgraders to ease export bottleneck

Caracas, 12 June (Argus) — Venezuelan state-owned oil company PdV is shutting down three remaining heavy crude upgraders that are still in operation so it can carry out extended repairs and clear congestion at its export terminals, multiple PdV officials told Argus today.

PdV's four upgraders, which are tied to production in the Orinoco heavy oil belt, account for more than 600,000 b/d of synthetic crude output. Most of this syncrude is exported from Jose at market-based prices, outside of the exports of diluted crude oil (DCO) and Merey blend that service oil-backed loans, mainly to China.

PdV is also beginning to restrict Orinoco production as ongoing logistical problems slow its efforts to decongest terminals where up to 30mn bl of crude exports currently are backed up.

The bottlenecks include inoperative storage and loading infrastructure that the company has been unable to repair because of sparse cash flow and a lack of international credit.

PdV's Orinoco division produced about 800,000 b/d of crude in April, a decline of over 450,000 b/d from officially reported Orinoco output of 1.25mn b/d in 2016. Orinoco division output figures for May have not been reported yet.

PdV's 210,000 b/d PetroPiar upgrader, in which US major Chevron holds a 30pc stake, has been off line since April and will not restart this month as the company originally planned.

"The timetable for completing repairs and restarting PetroPiar has been extended, possibly to the end of July or August," one of the three officials said. "Our operational problems include a deficit of extra-heavy crude supplies and imported inputs needed to produce syncrude." PetroCedeño, a 200,000 b/d upgrader in which France's Total and Norway's Equinor hold a combined 40pc stake, was shut down this week for repairs and because PdV's crude supplies to the upgrader are falling short of its operational needs, a second PdV official added.

PdV's 140,000 b/d PetroMonagas upgrader, in which Russian state-controlled Rosneft has a 40pc stake, also will be shut down this month for repairs that will take at least 60 days to complete. PdV's maintenance work on PetroMonagas originally had been scheduled to start in April, but was pushed back to this month, a PdV executive at PetroMonagas said.

PdV's wholly owned 120,000 b/d Petro San Felix upgrader, formerly called PetroAnzoategui, also will be suspended in June for planned repairs that originally were scheduled to start in late July.

PdV has been operating the four upgraders as a single unit since they were nationalized in 2007.

The export backlog, illustrated by dozens of tankers stalled in Venezuelan waters, started last month when US independent ConocoPhillips levied liens on PdV's Dutch Caribbean assets in an effort to collect a $2bn arbitration award.

The award stems from the nationalization of ConocoPhillips' stakes in two of the upgraders, PetroPiar and Petro San Felix, formerly known as Ameriven and PetroZuata.

PdV has begun to proactively shut in oil production to cope with nearly replete terminal storage, further accelerating an output decline and bringing the Opec country closer to the psychological barrier of 1mn b/d.

According to energy ministry official data communicated to Opec, Venezuela produced 1.533mn b/d of crude in May, up by 28,000 b/d from 1.505mn b/d in April. Average production cited by secondary sources published by Opec pegged Venezuela's May output at 1.392mn b/d, down by 42,500 b/d from 1.434mn b/d in April. Argus estimates May production at around 1.45mn b/d.

PdV officials privately dismissed the official tally showing an increase in Venezuela's output last month.

Two PdV upstream executives say that May production averaged about 1.44mn b/d.

So far in June, the outlook for Venezuelan production is grimmer. Venezuela was producing about 1.5mn b/d at the start of May, including roughly about 800,000 b/d in the Orinoco oil belt and a combined 700,000 b/d in the company's eastern and western divisions. But output in early June has dropped to 1.1mn-1.2mn b/d, according to three PdV officials.