US tightens ban on diluent trade with Venezuela

The US is expanding its prohibition on exports of diluents required to keep a large chunk of Venezuelan crude exports flowing.

US-based companies — and international firms with US presence — are prohibited from exporting or reexporting diluents, including from non-US sources, to Venezuela, the Treasury Department's Office of Foreign Assets Control (OFAC) said today in an updated guidance.

Diluents are added to heavy crude to enable it to be transported. PdV and its joint venture partners use naphtha and other diluents to transport extra-heavy crude from the Orinoco heavy oil belt to upgrading and blending plants at the Jose industrial complex in Anzoategui state in Venezuela.

The previous guidance from the Treasury Department, issued in January as part of a broad package of sanctions targeting Venezuela's state-owned PdV, prohibited exports of diluents from the US only. PdV prior to January relied on imports of naphtha and other diluents from the US to enable exports of heavy crude. But it since switched to other sources.

"Persons directly or indirectly exporting or reexporting diluents to Venezuela should exercise enhanced due diligence to verify the ultimate end user and ensure that the transaction does not involve a direct or indirect interest of a sanctioned person, including PdV, even if the sanctioned person is not identified as a participant in the transaction," OFAC said.

Venezuela's crude output dropped to around 500,000 b/d last month, down from the pre-sanctions level of 1.2mn b/d. India and China became the remaining destinations now that US sanctions prevent shipments into the US.

The OFAC guidance today re-affirms the 27 July cutoff date for Chevron, oil field service providers Halliburton, Schlumberger, Baker Hughes and Weatherford and Swedish specialty refiner Nynas to wind down business with Venezuela.

Most if not all of the services companies have already left, but Chevron remains a leading PdV upstream partner.