Venezuela breaks up LPG black market scheme

New arrests in the senior ranks of Venezuela's state-owned PdV shed light on a growing black market for scarce LPG supplies.

The head of PdV Gas Comunal, a subsidiary in charge of residential LPG distribution, was charged with orchestrating a nationwide scheme that allegedly funneled some 10,000 b/d of bottled propane into the illicit sale of 10kg canisters for $10 apiece.

PdV Gas Comunal president Jacob Grey and several associates were jailed on 5 February after government investigators discovered a warehouse in Carabobo state that served as a clandestine distribution hub.

None has responded to the charges.

Grey was appointed to the post in September 2020 after a meteoric rise in the ruling socialist party's youth movement.

The average poor Venezuelan family traditionally uses at least two canisters per month for cooking. At official subsidized prices, each canister is supposed to cost just $0.02. Some two-thirds of the country's 15mn LPG canisters are considered unsafe, according to the oil ministry.

Grey's network was sourcing the propane from PdV's 200,000 b/d cryogenic complex at Jose, which is only producing about 15,000 b/d or a third of residential demand. PdV's other sources of LPG, including rich natural gas fields and its refineries, no longer contribute to the market.

With so little available supply, many Venezuelans have resorted to inefficient electric hotplates or firewood for cooking.

"Grey was stealing two-thirds of the cryogenic plant's deficient propane output right under the noses of the internal security departments of PdV Gas and PdV," an aide to Venezuelan attorney general Tarek William Saab tells Argus. "Based on what we have learned to date, we believe that more senior figures in PdV are involved."

The sting operation will not alleviate Venezuela's critical LPG shortage because "the entire gas production, stripping, storage and distribution infrastructure operated by PdV and PdV Gas has deteriorated because of a complete lack of preventive maintenance dating since at least 2008," an oil ministry official tells Argus.

Venezuela was self-sufficient in LPG until 2009-10 when it was forced to start importing the product mainly from the US until sanctions blocked access to US suppliers in 2019. Although LPG is not specifically laid out in the sanctions, market overcompliance and PdV's financial difficulties have thwarted outside supply.

The Opec country has been chronically short of gasoline for more than a year, and diesel supplies are beginning to run low as well after the US ended crude-for-diesel swaps in the fourth quarter of 2020.