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Force majeure on PDVSA's oil exports?

08 Junio 2018

Venezuela's state-owned oil firm PDVSA is considering a declaration of force majeure if customers do not accept new contract terms to ease a bottleneck of tankers around its two main export ports, according to three sources familiar with the matter.

PDVSA's declining crude production, lack of spare parts and materials to run its refineries and difficulty importing critical light crude and naphtha to blend with its heavy crudes are progressively reducing the amount of oil available for export.

But the government of President Nicolas Maduro, condemned by the West and major Latin American nations over a May 20 re-election critics said was a farce cementing dictatorship, has been trying to project a more benign image in recent days. Nayara Energy, Valero Energy and units of CNPC, which each had vessels awaiting loadings on Wednesday, did not reply to a request for comment.

The OPEC member's export terminals have grown overcrowded since ConocoPhillips last month won court orders freezing PDVSA's key Caribbean operations, where the company used to ship large cargoes to Asian destinations.

The vessel, which has not yet set sail, had been waiting since February to load, according to Thomson Reuters vessel tracking data.

While attacking the U.S. for infiltrating the oil industry, Maduro told PDVSA workers to start a production "revolution" at the state oil company.

These transfers require specialised equipment, handling by specialists and facilitated by mooring masters, according to a provider of the service.

Venezuela's crude exports fell 6 percent in May to 1.168 million bpd following U.S. ConocoPhillips' (COP.N) legal actions to seize PDVSA's assets in four Caribbean islands, according to Reuters data.

The company's proposed STS transfer solution, to be performed in waters about 10km from Venezuela's Cardon refinery, faces resistance among oil buyers, according to shippers and traders.

Venezuela has been wracked by political turmoil and a severe recession and hyperinflation. The nation's crude exports in the first five months of 2018 were 27% lower than in the same period of 2017.

"A STS operation adds at least $1 per barrel to the purchase cost".

Insurance coverage for tankers and cargoes would also have to be changed to include the STS operation if customers accept the option, Campbell added.

Tankers waiting to load more than 24 million barrels of crude, almost as much as PDVSA shipped in April, are sitting off Jose, the country's main oil port, according to the data.

Crude spills affecting the waters surrounding several PDVSA's ports at Venezuela's western coast is another risk some customers see as an obstacle for the transfers.

Force majeure on PDVSA's oil exports?