Venezuela said to pre­pare plan B should US ban oil im­ports

Muscat Daily - - BUSINESS -

Hous­ton, US - Venezuela’s sta­te­owned oil com­pany and its part­ners have qui­etly started work­ing on a ‘plan B’ to find mar­kets for the coun­try’s crude oil if the White House ratch­ets up sanc­tions and bans im­ports.

Venezuela’s oil ex­ports are vi­tal to the cash-strapped coun­try, prompt­ing of­fi­cials to look for al­ter­nate des­ti­na­tions and sources of rev­enue, ac­cord­ing to peo­ple fa­mil­iar with the sit­u­a­tion. About a third of all oil pro­duced in Venezuela is pro­cessed at Amer­i­can re­finer­ies on the Gulf Coast. Ship­ments to the US were worth about US$12bn last year.

The US, cur­rently the largest sin­gle buyer of Venezue­lan crude, sanc­tioned Pres­i­dent Ni­co­las Maduro on Mon­day af­ter he held elec­tions over the week­end for a new as­sem­bly that will re­write the con­sti­tu­tion. Mean­while, Wall Street bankers are keep­ing their dis­tance from Si­mon Zerpa, the 33 year old vice pres­i­dent of fi­nance at Petroleos de Venezuela SA ( PDVSA), the state oil com­pany, af­ter the Trump ad­min­is­tra­tion levied sanc­tions against him and 12 other Venezue­lan na­tion­als last week.

“If a coun­try de­cides to stop buy­ing Venezue­lan oil, there are many mar­kets in the world were you can send Venezue­lan oil to,” Ri­cardo Me­nen­dez, the coun­try’s Plan­ning Min­is­ter, told re­porters Sun­day in Cara­cas. “We al­ready ex­port to oth­ers parts of the world and have very strong re­la­tions from a geopo­lit­i­cal stand­point with Rus­sia, China and In­dia.”

Venezuela may find that buy­ers in other coun­tries come at a cost.

PDVSA and other ex­porters would be forced to sell crude at deeper dis­counts in other parts of the world than the US, the peo­ple said. While China and In­dia, al­ready heavy tak­ers of Venezue­lan oil, are seen as the ob­vi­ous des­ti­na­tions, ship­ments to Asia may be re­stricted by lim­ited ca­pac­ity at Venezue­lan ports, they said.

PDVSA didn’t re­turn mes- sages seek­ing com­ment.

Fewer than half of Venezuela’s main load­ing points are pre­pared to load su­per­tankers, the most cost-ef­fec­tive way to trans­port oil to the Far East. That would likely push more Venezulean crude to Europe, where its oil would face steep com­pe­ti­tion from moreestab­lished grades from the Mid­dle East and Europe, the peo­ple said.

An­other al­ter­na­tive on the ta­ble would be to in­crease oil pro­cess­ing do­mes­ti­cally. The op­tion has lim­ited ef­fect, since the coun­try’s re­finer­ies are ex­pe­ri­enc­ing mul­ti­ple out­ages and break­downs due to lack of main­te­nance.

PDVSA’s re­finer­ies were op­er­at­ing at 43 per cent of ca­pac­ity in June. If they were op­er­at­ing at full rates, they could off­set the loss of the US mar­ket for the most part, ac­cord­ing to the peo­ple. At full rates, the re­finer­ies in Venezuela could take an ad­di­tional 550,000 bar­rels a day. That com­pares with 741,000 bar­rels a day im­ported by the US last year. The ramp-up in oil pro­cess­ing would pro­duce a sur­plus of oil prod­ucts that could even­tu­ally bite back at US re­finer­ies.

Venezuela oil pro­duc­tion dropped to a 14-year low of 1.97mn bar­rels daily in June as the coun­try is sad­dled by a heavy debt bur­den that pre­vents in­vest­ments.

The ban on oil im­ports from Venezuela is seen as un­likely, ac­cord­ing to some an­a­lysts. But it’s still on the menu of op­tions the US may take if the sit­u­a­tion con­tin­ues to de­te­ri­o­rate, ac­cord­ing to se­nior ad­min­is­tra­tion of­fi­cials.

(Bloomberg)

A gen­eral view of a stor­age fa­cil­ity near an oil re­fin­ery in Puerto La Cruz, Venezuela

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