PdV at odds to perform STS ops blocked in Carib

Venezuelan state-owned PdV lacks the logistical capabilities to compensate for the loss of its Dutch Caribbean export terminal and storage facilities with ship-to-ship transfer operations in Venezuelan territorial waters, oil union officials posted at PdV´s Jose terminal said.

PdV exported nearly 400,000 b/d of crude blends and refined products during first quarter 2018 from its currently embargoed terminal and storage assets on the Dutch Caribbean islands of Aruba, Bonaire, Curacao and St. Eustatius, according to the energy ministry.

PdV's exports from Bullen Bay in Curacao accounted for over 207,000 b/d or almost 52pc of the company's total exports from the islands during the first three months of 2018. PdV exports from its wholly owned Bopec terminal on Bonaire averaged a further nearly 138,500 b/d during this year's first quarter.

US independent ConocoPhillips succeeded in shutting down PdV's Dutch Caribbean operations last week with court-mandated liens in a bid to enforce collection of $2.04bn in compensation it was awarded last month by the Paris-based International Chamber of Commerce for the 2007 expropriation of two heavy crude upgrading assets in Venezuela.

PdV responded by moving all of its Dutch Caribbean export and blending operations to its Venezuelan terminals until the litigation with ConocoPhillips is resolved. Nearly all of the shifted operations are concentrated at its Jose terminal in Anzoategui state.

Jose, where PdV operates four Orinoco upgraders with a combined synthetic crude nameplate production capacity of over 600,000 b/d and the 130,000 b/d Sinovensa crude blending facility, accounts for up to 70pc of the volume leaving Venezuela, according to the energy ministry.

Venezuela's crude output averaged 1.5mn b/d in April, according to energy ministry figures communicated directly to Opec. Argus estimates Venezuela's crude output last month at about 1.4mn b/d.

Local oil consumption in Venezuela, including refinery feedstock and oil products, is now running at most around 300,000 b/d, half of what it was a few years ago, energy ministry and PdV officials estimate. Total exports from Venezuelan-based terminals last month averaged about 1.1mn b/d of mostly Orinoco heavy crude, with the Jose terminal in Anzoategui accounting for about 70pc of the total, the ministry said.

PdV ships much of the diluted crude exported from Jose to Bullen Bay and Bonaire for blending with light crudes imported mainly from the US and subsequent loading aboard VLCC and Suezmax carriers destined for China and India.

PdV expects to offset the temporary loss of its deepwater island facilities by resorting to ship-to-ship (STS) transfer operations in Venezuelan waters, the ministry added.

STS operations if launched likely would be centered on Pozuelos Bay near Puerto La Cruz where PdV's main Jose terminal and the much smaller Guaraguao terminal are located.

Jose has the terminal infrastructure, storage capability and large-capacity crude pipelines linking the terminal to legacy oil fields in eastern Venezuela and PdV's upstream extra-heavy crude ventures in the Orinoco oil belt, the ministry said.

"Two-thirds of Venezuela's oil exports ship from Jose, so logistically it makes sense to conduct STS operations if necessary in or near Pozuelos Bay," a ministry official said.

Other potential locations in eastern Venezuela including the bays of Guanta, Chaure, Bergantin and Pertigalete – all near Puerto La Cruz – have been considered and discarded because they are too narrow or shallow, and lack storage and pipeline infrastructure.

PdV also is considering STS operations in waters near the Cardon and Amuay refineries that comprise the 940,000 b/d CRP refining complex on the Paraguana peninsula in western Venezuela. But the area is susceptible to hurricanes.

Concentrating all of PdV's storage and export operations in Jose and Guaraguao will stretch both terminals beyond capacity, a senior federation of oil unions (FUTPV) director in Anzoategui said.

"Jose has the nominal storage and loading capacity to handle up to a 400,000 b/d rise in export operations, but it lacks the operational capacity and personnel to safely manage such a large increase in exports," the union official explained. "The operational strains on Jose and Guaraguao also would be aggravated by the need to import directly to Venezuela the imports that previously were destined for Bullen Bay."

"The higher risks of oil spills, and possibly explosions and fires could discourage foreign ship owners from engaging PdV in STS operations without appropriate financial and insurance guarantees if accidents happen," the union official said.

"Marine insurers also could be expected to charge very high rates or reject STS insurance involving PdV altogether, all of which makes a rapid settlement with ConocoPhillips the best option for PdV and (President Nicolas) Maduro's government," the official added.

PdV declined to comment, but senior company officials have previously told Argus the firm is ill-equipped to replicate the Dutch Caribbean logistical operations in Venezuela.