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ConocoPhillips liens test PdV’s logistics at home

09 May 2018 20:49 (+01:00 GMT)
ConocoPhillips liens test PdV's logistics at home

Caracas, 9 May (Argus) — Venezuela´s state-owned oil company PdV is quickly shifting all of its Caribbean logistics to its domestic terminals in response to US independent ConocoPhillips´ court-ordered liens on its Dutch Caribbean assets. But PdV´s terminals and refineries are ill-equipped to replace its extensive Caribbean network, company officials privately tell Argus.

PdV this week ordered its tankers to return to Venezuelan waters and is diverting cargoes from their original Dutch Caribbean destinations to local terminals led by Jose.

"Without the flexibility of Caribbean storage, it is a matter of days before this will impact production," a PdV official says. Replicating Caribbean operations in Venezuela is "impossible."

Another PdV official in Caracas echoed that view. Losing access to its Caribbean facilities could have "a cascade effect" on PdV's upstream operations in the Orinoco oil belt, which depends on light crude and diluent imports to produce diluted crude oil (DCO) and Merey blend for export.

The Caribbean facilities feature deepwater ports and tanker berthing facilities capable of accommodating VLCCs, the PdV added. "We've lost those assets until this situation is resolved."

Venezuela´s crude production has already tumbled by around 500,000 b/d to below 1.5mn b/d over the past year as a consequence of chronic under-investment. The Opec country now stands to lose more production, as much as 300,000 b/d by one estimate, because of the current debt-related crisis in the Caribbean.

PdV owns the 10mn bl Bopec storage facility on Bonaire and leases the 320,000 b/d Isla refinery and Bullen Bay terminal on Curacao. The company also leases storage at US company NuStar´s St Eustatius terminal and additional storage in Aruba. The facilities are critical to PdV´s export operations.

ConocoPhillips is seeking to pressure PdV into paying more than $2bn in compensation that was awarded to the company on 25 April by an arbitration panel of the Paris-based International Chamber of Commerce (ICC) for Venezuela´s 2007 expropriation of its Orinoco heavy crude projects.

As of this morning almost 80 tankers were clustered near PdV's four main terminals in Venezuela, including some 27 tankers at Pozuelos Bay at PdV's Jose upgrading and export terminal complex in Anzoategui state.

Another 15 tankers were anchored at the 635,000 b/d Amuay refinery and 17 tankers at the nearby 305,000 b/d Cardon refinery, which together comprise the 940,000 b/d CRP refining complex on the Paraguana Peninsula. A further seven tankers were off PdV's 146,000 b/d El Palito refinery in Carabobo state.

One of the PdV officials said the company has the most flexibility at the Guaraguao terminal near the Puerto La Cruz refinery, where some 10 tankers are lined up, but even here the options are limited.

The stored crude and refined products embargoed by the ConocoPhillips´ action are valued at more than $1bn at current market prices, an energy ministry official told Argus.

PdV is focusing the difficult transition on its Jose complex, which is capable of handling up to 1.6mn b/d, just over half of its design capacity of 3mn b/d. A senior official of the federation of oil unions (FUTPV) who works at the Jose terminal warned that the facility is at risk of collapse.

"Jose has operational loading and storage capacity limitations because necessary maintenance and equipment replacement were not done," the union official said. "Procurement contracts were issued but were never fulfilled completely, and the Jose terminal continues to deteriorate."

PdV's workers at Jose are "too hungry and too sick" to withstand the increased physical demands placed on them, the official said, alluding to Venezuela´s severe economic crisis. "There will be more accidents and more equipment failures at the Jose terminal because the workers are in poor health, and PdV's exports will be affected as a result."

An energy ministry official denied that the liens have disrupted the company´s blending and export operations. PdV's Jose and CRP terminals can "safely manage a sustained increase in operational tempo," the ministry official said.