PdV liabilities in Curacao beget more fuel oil sales

Another fuel oil cargo is coming on the market from Curacao through a US government-authorized transaction designed to service local liabilities left by Venezuelan state-owned PdV after it withdrew from the Dutch-controlled Caribbean island in December 2019.

In the second such transaction, Vitol purchased a 230,000 bl cargo of high-sulfur fuel oil (HSFO) that loaded aboard the Liberia-flagged Promoter at the island's Bullen Bay terminal in early August. The cargo started discharging into storage on 23 August at the fellow Dutch Caribbean island of St Eustatius, according to shipping data and market participants. Vitol said it does not comment on its commercial activities.

Argus assessed US Gulf 3.5pc sulphur fuel oil at an average of $40.17/bl for the period 1-24 August.

The sale of another cargo of 290,000 bl of HSFO is under negotiation, according to Engineering and Training Kwisolutions, a Curacao-registered contractor serving as a broker for the oil to which PdV's former local subsidiary Isla no longer has title. Other products still stored on the island could come on the market by the end of the year.

The transactions are permitted under a specific license for Curacao issued by the US Treasury Department's Office of Foreign Assets Control (OFAC), sources tell Argus. But the sales have been challenging to complete because of tight scrutiny to ensure compliance with the US' sanctions on Venezuela. The Opec country has been subject to US oil sanctions since January 2019.

Under the terms of the OFAC license that expires on 31 December, the oil sales revenue is earmarked to pay PdV's outstanding local debts. The debt includes severance payments to labor unions and payments to Curacao-owned utility CRU that provided industrial services to the idle 335,000 b/d Isla refinery formerly operated by PdV.

The government of Curacao is owed up to another $100mn for PdV's failure to comply with a May 2018 local court order that partially lifted pre-judgment attachments on PdV's local assets by ConocoPhillips in exchange for meeting its fuel supply obligations. It is unclear if that debt will eventually be paid through the OFAC-approved oil sales mechanism.

The unspecified debt owed to Isla's former workers was divided into five tranches, of which three have now been paid. The first was covered by Isla funds on the island, and the second was covered by an initial fuel oil sale in January 2020. The third was covered by the August sale, and the fourth sale is in progress.

PdV's long-term lease on the refinery and Bullen Bay terminal expired at the end of last year. RdK, the Curacao state entity that owns the assets, has been trying to find an alternative operator. A deal with German refiner and commodities trader Klesch collapsed earlier this year. Under a new tender, Curacao has solicited non-binding bids by 8 October. RdK is conducting a separate tender for a storage lease.

A privileged creditor

The oil sales from Curacao stand out for providing a route to satisfying PdV's modest local debts, in contrast to the more than $150bn in unpaid obligations held by PdV and the Venezuelan government, mainly in the US. Myriad creditors — including former Canadian mining company Crystallex, ConocoPhillips and bondholders — are battling in US courts to win control of PdV's US subsidiary Citgo.

Curacao used to be part of PdV's extensive Dutch Caribbean logistical network that also included Aruba and Bonaire.

By Patricia Garip