US reimposes Venezuela oil sanctions

  • : Crude oil
  • 24/04/19

The most immediate impact of the decision is likely to be a re-routing of Venezuelan oil flows, write Haik Gugarats and Kuganiga Kuganeswaran

The US administration on 17 April reimposed sanctions targeting Venezuela's oil exports and energy-sector investments, and set a deadline of 31 May for most foreign companies to wind down business with state-owned oil firm PdV.

The US decision rescinds a sanctions waiver issued in October that allowed Venezuela to sell oil freely to any buyer and invite foreign investment in the country's energy sector. The waiver, which was due to expire on 18 April, was tied to Caracas' agreement to hold a competitive presidential election and allow opposition politicians to contest it.

Venezuelan president Nicolas Maduro's government reneged on this deal by refusing to register leading opposition candidate Maria Corina Machado or an alternative candidate designated by her, a senior US official says. The US considered the potential effects on global energy markets and other factors in its decision, but "fundamentally, the decision was based on the actions and non-actions of the Venezuelan authorities", the official says. Separate sanctions waivers granted to Chevron and oil field service companies Halliburton, SLB, Baker Hughes and Weatherford will remain in place. Chevron will be allowed to continue lifting oil from its joint venture with PdV, solely for imports to the US.

US-bound Venezuelan crude volumes averaged 133,000 b/d last year, up from nothing in 2022. Chevron says its Venezuela output was 150,000 b/d at the end of 2023. Argus estimated Venezuela's crude output at 850,000 b/d in March, up by 150,000 b/d on the year. PdV says it will seek to change the terms of its nine active joint ventures, starting with Spain's Repsol, in a bid to boost production.

Sanctions impact

The reimposition of sanctions will primarily affect Venezuelan exports to India and China. India has emerged as a major new destination for Venezuelan crude since the US lifted sanctions in October, having imported 152,000 b/d in March. Two more Venezuelan cargoes are heading to India and expected to arrive before the 31 May deadline. The VLCC Caspar left the Jose terminal on 14 March and is expected to arrive at an as-yet-unknown Indian west coast port on 26 April. The Suezmax Tinos left Venezuela on 18 March and is due at Sikka on 30 April.

Chinese imports of Venezuelan Merey, often labelled as diluted bitumen, have been lower since October. Independent refiners in Shandong, which benefited from wide discounts on the sanctioned Venezuelan crude, cut back imports to just a fraction of pre-relief levels as prices rose, while state-controlled PetroChina was able to resume imports under the waiver. The Merey discount to Brent had already widened in anticipation of the reimposition of sanctions.

Separate US authorisations previously issued to Repsol and Italy's Eni to allow oil-for-debt deals with PdV and enable a Shell project to import natural gas from Venezuela's Dragon field to Trinidad and Tobago are expected to remain in place. Repsol imported 23,000 b/d of Venezuelan crude to Spain last year and 29,000 b/d so far this year, according to data from oil analytics firm Vortexa.

US sanctions enforcers as a rule do not disclose the terms of private sanctions licences, and the European companies were not immediately available to comment. The US would still consider future requests for sanctions waivers for specific energy projects, another senior official says.

The US administration says it will consider lifting the sanctions again if Maduro's government allows opposition candidates to participate in the July presidential election. The US' action on 17 April "should not be viewed as a final decision that we no longer believe Venezuela can hold competitive and inclusive elections", a third senior official says.

Chinese imports of Venezuelan crude

Venezuelan crude exports

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