The US administration is looking at ways to mitigate any spillover effects should it impose sanctions on Venezuela's oil sector, US secretary of state Rex Tillerson said.
"We will be looking at the impact on regional countries," Tillerson said today in Kingston, Jamaica, as he wrapped up a weeklong tour of Latin America. The US is studying ways to soften the effects of potential restrictions on countries importing crude oil from Venezuela, using "our rich endowment and with the infrastructure that we already have."
Tillerson declined to provide details or timing of possible US sanctions. Several options are on the table, including targeting Venezuelan crude oil exports through financial sanctions and restricting Venezuelan oil imports into the US or US exports of crude or products used as diluent in Venezuela.
Venezuela once supplied subsidized oil to many of its neighbors in the Caribbean and Central America through the PetroCaribe preferential supply program. But state-owned PdV has cut the amount of crude and products it provides PetroCaribe members as its own output and exports plummeted.
Venezuela's crude production rebounded to 1.742mn b/d in January, according to official data obtained by Argus. That follows an almost 30pc decline in production in the year to December 2017, when Venezuela reported 1.621mn b/d in output to Opec. Argus estimates January production even lower, at 1.5mn b/d.
Jamaica, once a PetroCaribe recipient, no longer imports crude from Venezuela, Jamaica's prime minister Andrew Holness said. "With the new dynamics in the global trade and energy and with the US now becoming a net exporter of energy resources, Jamaica can benefit from that," he said.
President Donald Trump's administration — just like its predecessor — has encouraged PetroCaribe recipients to end dependence on Caracas, promising US assistance in diversifying to alternative supplies of power generation. The Trump administration sees this as an opportunity to promote exports of US LNG to its immediate neighbors.
"We are looking to promote energy independence in Jamaica and throughout the region and stand ready to share the abundance of the resources of North America," Tillerson said. He also commended Jamaica's efforts to develop solar and wind resources.
Venezuela's president Nicolas Maduro has brushed off possible oil sanctions. But public discussion of possible oil sanctions on Tillerson's visit appears to have caught Caracas by surprise. Venezuelan government officials have assumed that the US would shy away from blocking imports of Venezuelan crude that would disrupt supply to the US refineries configured to run the Opec country's heavy grades.
The US in August 2017 imposed financial sanctions on the government and state-owned oil company PdV, effectively blocking access to long-term credit in US financial markets.
Washington also imposed sanctions on Maduro and dozens other senior Venezuelan government and military officials, effectively freezing their US assets and banning travel to the US.
According to the US Energy Information Administration, the US imported 467,000 b/d of Venezuelan crude in November 2017, down by a third from 694,000 b/d in November 2016. US products exports to Venezuela averaged 88,400 b/d in November 2017, down from 154,200 b/d a year earlier.
US refiners group AFPM said it remained concerned about the potential effect of additional oil sector sanctions on US refineries and consumers.
"We appreciate the thoughtful approach the administration has taken on this issue so far, and look forward to working with administration officials to ensure any new sanctions are targeted, effective, and do not inadvertently harm US business and consumers," AFPM said.
