PdV El Palito refinery at capacity in 2 months: Update

Market: Crude oil, Oil products
20/06/23

Adds comment from Maduro legislator in paragraphs 6-8

Venezuela's 140,000 b/d El Palito refinery will be operating at full capacity within two months, according to Iranian state-owned engineering company NIOEC, which has been carrying out critical repairs on the facility.

"Some of the refining units have already begun working following the completion of major repairs," NIOEC chief executive Farhad Ahmadi said today. "But there is still work ongoing on several other units, including the distillation column and the vacuum distillation unit (VDU)."

Ahmadi said all repair work will be completed, and the refinery "fully operational, all within the next two months."

NIOEC, a subsidiary of Iran's state-owned refinery operator NIORDC, has been leading repair work at El Palito as part of an agreement signed in May 2022 between Tehran and Caracas to supply Venezuela with equipment and expertise to revamp the facility. Iran's oil minister Javad Owji has previously said that as part of those agreements, Iran plans to send up to 100,000 b/d of its crude for refining at El Palito.

The refinery had been offline for much of the past 10 months after key processing units were damaged in August, allegedly by Iranian crude that did not meet the refinery's specifications. State-owned PdV then relied more on its 635,000 b/d Amuay and 305,000 b/d Cardon refineries, but these have suffered repeated power outages, fires and related compressor problems.

A Venezuela-based source told Argus last week that El Palito was undergoing "major maintenance," but said some units were operational and producing around 20,000 b/d of diesel and gasoline combined.

But the El Palito refinery still lacks enough crude, especially lighter grades from the Venezuelan states of Apure and Barinas, said Elbano Sanchez, a lawmaker with the party of Venezuelan President Nicolas Maduro. More work is needed before the plant, beset by maintenance problems being addressed by the Iranians, can ramp up, Sanchez said.

Still, "there will be more gasoline in the next few days," he said. Shortages have worsened in recent weeks.

Growing partnership

The May 2022 downstream-focused agreement built on an existing co-operation between the two sanctions-hit Opec producers that saw Iran support the recovery in Venezuela's crude production from lows of around 500,000 b/d in early 2021.

Iran was sending shipments of condensate to dilute and upgrade Venezuela's extra heavy Orinoco belt crude into an exportable grade. The latest shipment, according to Vortexa, was a 2.05mn bl cargo of South Pars condensate that discharged at Venezuela's Jose terminal on 23 April.

Argus estimated Venezuelan crude production at 790,000 b/d in May, around 45,000 b/d below PdV's own estimate. PdV president Pedro Tellechea said this week that crude output could reach 900,000 b/d this month, and 1mn b/d by August.

Venezuela has been trying to revamp its neglected and sanctions-hit oil infrastructure through its partnership with Iran, which has expanded in recent months. Earlier this month, Iran's President Ebrahim Raisi said the two countries had signed an agreement during his visit to Caracas that aimed to increase bilateral trade to as much as $20bn/yr, up from around $3bn/yr today.

Iran separately signed an agreement this month to help revamp an unnamed Venezuelan ammonia complex as part of Caracas' efforts to restore its operational petrochemical production capacity to 12mn t/yr from just 2mn t/yr today.

By Nader Itayim

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