PdV gasoline imports, DCO exports soar in Sept

Venezuela's state-owned PdV imported a record volume of gasoline and exported a record level of low-value diluted crude oil (DCO) in September, with crude-for-products barter nearly wiping out cash revenue altogether, according to internal company data obtained by Argus.

September imports of gasoline totaled more than 72,000 b/d last month, compared with 44,000 b/d in August and 40,000 b/d in July. Most of the gasoline came from PdV's US refining subsidiary Citgo and the US subsidiary of India's Reliance Industries (RIL), with a small volume from Trafigura.

The September gasoline imports were surpassed by 77,000 b/d of imported naphtha, which PdV uses as a diluent to blend with its extra-heavy Orinoco crude to produce DCO. The September naphtha import volume is historically high, but was exceeded by 90,000 b/d in August and 92,000 b/d in July.

The naphtha suppliers in September were Vitol and RIL, with a small volume from Glencore.

The September data indicate that PdV exported 300,000 b/d of DCO, some five times more than a year ago. The DCO exports have been steadily creeping up from 184,000 b/d in January, with a previous peak of 298,000 b/d in February when heavy crude upgrader PetroPiar was down for maintenance.

More than half of last month´s record DCO shipments went to RIL and Russia´s Rosneft, which controls the 400,000 b/d Vadinar refinery on India´s west coast. Most of the rest went to Citgo, with a small volume to Chevron.

RIL stands out for its presence in the products supply and DCO sales, confirming that the Indian refiner is playing a significant role in PdV´s commercial transactions, perhaps especially in the barter space. The company is also a regular lifter of PdV´s 16° API Merey, a blend of heavy and light crude grades. Merey fetches a higher market price than DCO, but PdV does not produce enough light crude to make more of it, and can no longer afford to import it.

The other stand-out in the commercial transactions is Citgo, which PdV could be forced to relinquish as early as December because of a debt-related dispute playing out in a Delaware federal court. If PdV loses its US subsidiary, it would have to negotiate oil supply and purchase deals with Citgo´s new owners on terms that the Venezuelan firm is unlikely to able to be fulfill.

The unprecedented gasoline imports and DCO exports in September are a consequence of Venezuela's declining crude production and 25pc operational refining capacity. Crude production is currently around 1.2mn b/d, down by 600,000 b/d from a year earlier.

Venezuela´s crude production and refineries show no signs of recovering, pointing to the likelihood that the commercial trends will continue, potentially leading to 100,000 b/d of gasoline imports by December.

But a breakdown of September exports shows an "alarming" trend that is commercially unsustainable for PdV, a senior PdV official told Argus.

Around 730,000 b/d, or more than two-thirds of Venezuela's September oil exports of around 1.1mn b/d went to service oil-backed debt to China and Russia through Rosneft — and some of those exports came out of storage. Another 100,000 b/d was swapped for gasoline and naphtha. Around 250,000 b/d was synthetic crude from PdV's Orinoco upgrading joint ventures, with just part of the revenue going to PdV.

This leaves only around 100,000 b/d sold entirely for cash revenue for PdV.

PdV did not respond to a request for comment.

The distressed company faces close to $1bn in bond debt payments due on 27 October. The PdV 2020 bond, the only debt instrument on which the company or the government is solvent, is secured by 50.1pc of the shares in Citgo´s indirect parent, Delaware-based PdV Holding. The other 49.9pc of the PdV Holding shares is pledged to Rosneft for a $1.5bn oil-backed loan.

PdV owes a separate $500mn to US independent ConocoPhillips next month as a first installment on the August settlement of a $2bn arbitration claim.