PdV halves fuel distribution to cope with sanctions

Drivers are lining up at Venezuelan service stations as new US oil sanctions and panic buying further limit gasoline supply.

State-owned PdV, the target of the US sanctions announced in Washington on 28 January, now relies almost entirely on imports of gasoline and diesel because its domestic refineries are barely operating.

The oil ministry maintains that PdV has sufficient motor fuel on hand to cover 30 days of local consumption of about 300,000 b/d. An oil union critic warns that Venezuela could deplete its remaining fuel stocks to "socially intolerable" levels before the end of February.

In Caracas and other cities such as Maracaibo, Puerto La Cruz and Valencia there are early signs of panic buying as the political crisis gripping the Opec country sinks in.

The US sanctions are aimed at unseating Nicolas Maduro from the presidency in favor of National Assembly speaker Juan Guaidó, whom the US, Canada and most of Latin America recognize as Venezuela´s legitimate president since last week.

PdV is trying to extend its domestic fuel stocks by reducing local distribution volumes that were already low because of the company´s severe financial problems. This week PdV halved its fuel deliveries to service stations nationwide, an oil ministry official with direct knowledge of the unofficial rationing measure tells Argus.

PdV has about a month to line up new foreign suppliers to replace the products it can no longer source in the US, the official said.

New suppliers not affected by the US sanctions will demand guaranteed pre-payment before allowing cargoes to be offloaded in Venezuelan terminals, the official said. With PdV's crude output expected to drop by up to 300,000 b/d in coming months as a result of the sanctions, its payment difficulties with suppliers likely will increase.

The sanctions already have prevented PdV from paying for over 5mn bl of imported products aboard tankers waiting at PdV terminals to discharge their cargoes, which represent roughly two weeks of local consumption at over 357,000 b/d, a volume that includes diesel for thermal power generation, the oil ministry official said.

PdV is demanding the tankers be offloaded before departing Venezuelan waters, but cargo owners and tanker operators are balking. "It's a payments problem," a PdV official at Jose said. "Cargo and tanker owners are refusing to accept payments from PdV out of concern they could be charged with violating the new sanctions against the company."