Russia, Venezuela discuss Citgo collateral deal to avoid US sanctions — Sources
CARACAS/ HOUSTON: Russia’s top oil producer Rosneft is negotiating to swap its collateral in Venezuelan-owned, US-based refiner Citgo for oilfield stakes and a fuel supply deal – a move to avoid complications from US sanctions, two sources with knowledge of the negotiations told Reuters.
State-owned Rosneft holds a 49.9 per cent stake in Citgo as collateral for a loan last year of about US$1.5 billion to the OPEC nation, which is reeling from low oil prices and a severe recession.
The arrangement with Venezuela’s state- owned oil firm, PDVSA, has drawn fire from US senators who do not want Russia in a position to own a substantial stake of US-based energy assets in potential violation of existing economic sanctions.
The negotiations took on more urgency this week, one of the sources told Reuters, when US President Donald Trump threatened to impose “strong economic actions” on Venezuela unless embattled leftist President Nicolas Maduro aborts plans to establish a new legislature with powers to rewrite the nation’s constitution.
Such sanctions, which could include a ban on US oil imports from Venezuela, could undermine Citgo’s business model and threaten Venezuelan or Russian ownership of the US-based firm in the long term.
Under a new proposal being discussed this week in Moscow by top executives from Rosneft and PDVSA, the collateral stake in Citgo would be exchanged for a package of eight key deals, one of the sources with knowledge of the talks said.
Under the proposed swap, Rosneft would receive:
• refined products from Citgo as partial payment for the loan extended last year;
• ownership stakes in three crude fields - Rosa Mediano, Tia Juana Lago and Lagunillas Lago – in Venezuela’s traditional oilproducing state of Zulia;
• stakes in two offshore natural gas fields, Patao and Mejillones, that are part of the large Mariscal Sucre gas project, which has reserves of 14 trillion cubic feet (TCF);
• a settlement payment for late dividends that are due to Rosneft by PDVSA from their largest joint venture, the extra heavy oil project Petromonagas;
• rights to sell Venezuelan condensate - a mixture of liquid hydrocarbons present in natural gas deposits - from the Rio Caribe field, which is also part of the Mariscal Sucre project;
• rights to commercialize Rosneft’s share of oil output from all joint ventures with PDVSA, which would allow the Russian firm to export its share of its entire production in Venezuela.
Typically, minority partners are required to sell their oil output from joint projects to PDVSA.
Under the proposal, Rosneft would also be allowed to preside over its joint ventures with PDVSA on a rotating basis and be in charge of procurement for major purchases.
That would give Rosneft more control over operations – something foreign minority partners have craved in Venezuela for years, one of the sources told Reuters.
Foreign oil executives frequently complain of delays, inefficiencies, and opaque procurement contracts at joint ventures that are majority owned by cash-strapped PDVSA. — Reuters