As sanctions strangle Venezuela’s oil exports…

Chinese firm halts work on Orinoco blending facility over $$ owed

Whatever the eventual outcome of the firm grip in which the sanctions imposed by the United States has left Venezuela’s oil industry, it is now clear that at the end of the ordeal the sector will be in need of an overhaul that may take a considerable amount of time, perhaps even a few years.The latest blow to the country’s oil and gas sector was last week’s withdrawal of service by the Chinese contracting firm, China Huanqiu Contracting and Engineering Corporation, an affiliate of governmentrun China National Petroleum Corp (CNPC), contracted to work on the expansion of a crude oil blending facility on account of non-receipt of payment. The facility is part of the Sinovensa joint venture between CNPC and Petróleos de Venezuela SA (PDVSA) and is intended to expand the crude oil blending capability by 57% to 165,000 barrels per day.

The irony here is that the Chinese are not among the supporters of the Trump administration’s sanctions against Venezuela, which have already dealt a body blow to the Venezuelan economy.

The news that the Chinese have ‘downed tools’ comes a matter of weeks after the state-controlled Petróleos de Venezuela SA had announced that a second expansion of the Sinovensa project would take output to 230,000 barrels per day (bpd) at the project, which is jointly owned by PDVSA and CNPC, China’s biggest energy company.

The halt to the project is the latest blow to the Venezuelan oil sector which, in the wake of the US sanctions, has become progressively reliant on Russian and Chinese oil companies to prop up the oil sector. The isolation of the Maduro administration – and more particularly, the country’s oil and gas industry – is likely to worsen when Chevron Corp. and four U.S. oilfield service companies cease work in Venezuela at the end of October unless the US administration extends already existing waivers on foreign drilling rigs