PdV official oil flows slide, export backlog eases

The decline in Venezuelan crude production is accelerating, but an export backlog is easing as state-owned PdV moves more of its blending operations offshore.

PdV produced 2.37mn b/d of crude in May, down by 4.8pc from April and 14pc lower than May 2015, according to data that PdV reports on a monthly basis to Opec. PdV routinely reports higher production of around 2.7mn b/d to Venezuela's opposition-controlled national assembly and to the local press. But the energy ministry said that the lower numbers reported to Opec are "more accurate." Argus estimates Venezuelan crude production is trending lower toward 2mn b/d.

The ministry blames the decline on sharply lower oil prices. "PdV's export prices are recovering slowly, but are still too low to cover current operating costs, advance new investments and service its debts," a ministry official told Argus. PdV's average export price for 6-10 June was $40.52/bl, but the year-to-date average up to 10 June was only $30.05/bl, according to ministry data. PdV's cash flow troubles have forced the company to slash essential upstream capital expenditures to reverse natural depletion rates of up to 25pc annually in traditional areas including Zulia and Anzoategui states, the ministry said.

PdV's cash crisis also has delayed payments to oil services contractors such as Schlumberger, Halliburton and Baker-Hughes, which have reduced the scope of their operations in Venezuela until PdV starts paying over $2bn in combined past-due invoices. PdV currently owes its contractors and services providers over $20bn and is scrambling to develop alternative payment options including the issuance of bonds, promissory notes and crude supplies in lieu of cash.

PdV has tried with some success to swap Venezuelan crude and products for light crude and naphtha imports needed for blending and diluent to produce exportable Merey 16, and to transport Orinoco extra-heavy crude from the wellhead to its Jose terminal in Anzoategui state.

BP offloaded a 500,000 bl US light sweet crude cargo earlier this month at the Caribbean island of Curacao's Bullen Bay terminal after reaching a crude swap payment deal with PdV, the energy ministry confirmed. BP declined to comment. PdV is hoping the BP swap deal establishes a precedent that will expedite the delivery of over 2.1mn bl of light crude currently loaded aboard four BP-chartered tankers anchored for almost a month now near Bullen Bay, the ministry said. The undelivered cargoes are part of a tender for over 8mn bl of light crude that PdV awarded in March to BP and China Oil for delivery during the second quarter.

State of disrepair

The Bullen Bay crude and products tank farm and nearby 325,000 b/d b/d Isla refinery that PdV operates under a lease that expires in 2019 have become increasingly important to the company's export and crude blending operations, as it struggles to repair its terminal installations at Jose in Anzoategui state.

Installations have faltered not only because of a lack of investment but also because the company is using export-oriented infrastructure for imports. PdV completed the installation of three new loading arms at Jose's Petroterminal in early June, but up to five other loading arms are still damaged. Petroterminal, part of Jose's storage and export infrastructure known as Taecjaa, was originally designed to load up to 80,000 bl per hour of different crude grades including 32°API Mesa and 16°API Merey.

Taecjaa was designed to export over a combined 5mn b/d of liquids, but it is currently handling around 1.5mn b/d because of lingering loading issues, in addition to lower throughput from PdV's aging light and medium crude areas such as Furrial and Jusepin in eastern Venezuela.

Jose's western single point mooring buoy, designed to load up to 60,000 bl/hour, is currently operating at only 30pc of design capacity, a PdV operator at Taecjaa tells Argus.