PdV casts wide net for alternative products supply

Newly-sanctioned PdV of Venezuela is casting a wide net in search of naphtha, gasoline and other refined oil products that it can no longer source from the US.

Fuel is already running low in the Opec country as PdV scrambles to replenish supplies that its crippled refineries have not produced for months.

PdV´s private-sector suppliers have now mostly withdrawn, including India´s Reliance, which had been a steady crude buyer and products supplier. One exception is Spain´s Repsol that has been supplying limited volumes of gasoline in exchange for crude, PdV and market participants tell Argus. Repsol declined to comment.

PdV is now approaching state-owned companies such as Algerian state-owned Sonatrach, but no firm agreement has been reached on volumes, prices and payment methods, a Venezuelan oil ministry official told Argus. In previous years, Sonatrach supplied light crude to PdV for its heavy-crude blending operations. The Algerian company has not commented.

Payment terms are an obstacle, the Venezuelan official said. "Like all suppliers that PdV does business with, the Algerians want prompt payment guarantees," the official said.

At issue in the product negotiations is whether PdV would pay in cash or crude, or a combination of both. Cash-poor PdV increasingly has bartered crude for imported products since 2017. PdV in the past year also has paid in oil to service debt to joint venture partners such as India's ONGC and Repsol and to pay an arbitration settlement with ConocoPhillips.

PdV has also reached out to Iran and Russia, other countries run by governments friendly to Caracas. President Nicolas Maduro is in the throes of a political standoff with rival Juan Guaidó, who is recognized by most Western countries as Venezuela´s legitimate president.

PdV had been importing more than 100,000 b/d of refined products including gasoline and naphtha from the US before Washington announced the oil sanctions on 28 January.

Naphtha, all of which had come from the US, is critical for transporting Venezuela´s extra-heavy crude from the Orinoco oil belt as diluted crude oil (DCO). Part of the DCO is exported directly into the market. The rest is upgraded into synthetic crude or blended with domestic light crude at PdV´s main oil terminal of Jose. Without naphtha, 200,000-300,000 b/d of Venezuela's crude exports are at risk.

Local naphtha stocks used to make DCO are nearly exhausted, affecting production as early as next week, the oil ministry official said. A PdV official says the company and its joint venture partners are already dialing back well flow rates in the face of storage bottlenecks.

So far PdV is expressing confidence in its ability to open new supply channels.

"PdV is working with its most important partners and strategic allies to secure new supplies of the imported products needed for upstream production and refinery operations, and it has the will to resist the US sanctions," the official said.

Oil minister and PdV chief executive Manuel Quevedo maintains that the "criminal US sanctions" against the company have not hurt its core operations.

But PdV and oil union officials working with the company´s western, eastern, Orinoco and marketing divisions at Jose say the sanctions have severely disrupted operations.

Exports have backed up and products imports have stopped. PdV export clients, foreign products suppliers and tanker owners/operators are refusing to load and offload cargoes.

Venezuelan security forces earlier seized at least two tankers with motor fuel and forced their crews to unload. Up to a half-dozen more incidents at PdV terminals have been reported, involving confrontations between tanker crews carrying import cargoes and PdV officials backed by security forces including national guard and police, independent shipping agents in Caracas, Maracaibo and Jose said.