Latest market news

China joins Iran in PdV quest to repair refinery

  • Market: Crude oil, Oil products
  • 08/05/20

The governments of Iran and China are working closely with Venezuelan state-owned PdV to restart the 940,000 b/d CRP refining complex and replenish nearly exhausted fuel supply.

The refinery repair work is quietly carrying on against the tumultuous backdrop of a foiled coup plot over the weekend, giving President Nicolas Maduro a political edge over his US-backed foes in the opposition.

Iranian state-owned Mahan Air has made 16 direct flights since 22 April from Tehran to Josefa Camejo international airport near the CRP on the Paraguana peninsula, bringing in catalyst, refinery parts and technicians from Iran and China, according to five PdV and oil ministry officials with direct knowledge of the ongoing airlift operation between the Chinese city of Chengdu, Tehran and Paraguana.

Venezuela's INAC commercial air authority has authorized Mahan Air to make up to 20 direct flights from Tehran to Paraguana, but additional flights will be approved "as needed," a senior INAC official tells Argus.

Chinese state-owned CNPC subsidiary Jichai Power Equipment Company in Chengdu is among the Chinese firms shipping compressors, refinery parts and technicians to Paraguana with Mahan Air, an oil ministry official said.

China also is supplying PdV with catalyst because Iran does not produce enough of the substance to fully supply the needs of its own refineries, the ministry official added.

Iranian state-owned engineering company Khatam al-Anbiya, a US-sanctioned entity affiliated with the Islamic Revolutionary Guard Corps (IRGC), is also supplying PdV with refinery parts and technicians, the official added.

Local Chinese diplomatic and CNPC officials declined to comment on the downstream cooperation. Iran's embassy in Caracas did not respond to three telephone requests seeking comment.

US-sanctioned Mahan Air has delivered about 700 tons of Iranian and Chinese catalyst since 22 April, a PdV downstream official at the CRP refining complex said by telephone. Among the delivered parts are compressors and pumps, the oil ministry said.

Mahan Air has set up an "air bridge operation" that extends from Chengdu through Tehran to Paraguana, according to a member of Venezuela's PdV restructuring commission.

"In some instances, cargoes have been transferred from flights arriving in Tehran from Chengdu to flights leaving Tehran immediately for Venezuela," the commission official said. "We're confident we can restart the CRP's gasoline production operations soon with the assistance of our Iranian and Chinese partners."

The flights are returning immediately to Tehran within hours after landing in Paraguana, according to a CRP union official who claims to be in "permanent contact" with workers at the heavily militarized airport.

The cooperation was brokered directly by new acting oil minister Tareck El Aissami, who also heads the restructuring commission, ministry and PdV officials said.

Aissami's commission co-chair, acting PdV chief executive Asdrubal Chavez, also participated in the refinery repair discussions.

The Maduro government is paying Mahan Air and suppliers of catalyst, parts and technical support in Iran and China with gold bullion from the Central Bank of Venezuela.

A Venezuelan central bank official confirmed reports that over nine tons of gold valued at more than $500mn have been shipped from Venezuela to Iran since the airlift started on 22 April.

PdV repair crews supported by Iranian and Chinese technicians currently are focusing efforts on restarting up to 86,000 b/d of gasoline production at the 305,000 b/d Cardon refinery, which together with the 635,000 b/d Amuay refinery comprises the CRP refining complex that PdV has operated as a single integrated facility since 1997.

After Cardon resumes crude processing, the Iranian and Chinese technicians will support PdV's efforts to restart Amuay and the 140,000 b/d El Palito refinery in Carabobo state, the oil ministry said.

Skepticism

The CRP, which accounts for about 72pc of PdV's crippled domestic refining capacity of 1.3mn b/d, was once considered a world-class facility. The complex has a combined 42 crude processing units including 10 distillation towers, nine vacuum distillation units, nine hydrotreaters, two fluidized catalytic crackers, three deep conversion units, three alkylation units, two isomerization units, three MTBE/TAME units, and one catalytic naphtha reformer.

The CRP also has lubricants, asphalt and sulfur production units, plus over 57.3mn bl of combined crude and refined products storage capacity.

"Almost all of the CRP's crude processing units are currently shut down, with a handful at about 10pc of their nominal capacity," a senior oil union official at Cardon said.

Despite the intensive airlift operations, union officials at the CRP remain skeptical that PdV can restore gasoline production in the near term.

"The CRP is engineered to operate as an integrated unit, which means all of its processing units must be operational to assure safe and sustained fuel production," a senior union official said.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
07/11/24

US extends oil service firms' Venezuela waiver

US extends oil service firms' Venezuela waiver

Washington, 7 November (Argus) — The outgoing administration of US president Joe Biden extended authorization for oilfield services companies Halliburton, SLB, Baker Hughes and Weatherford to continue working in Venezuela until 9 May 2025. The waiver allows the service companies to pay their staff and maintain limited operations, but it prevents them from drilling new wells or otherwise contributing to state-owned PdV's production and exports. The Biden administration reimposed sanctions on Venezuela's oil sector in April, after a six-month reprieve. The sole exemption is a waiver for Chevron allowing it to import oil into the US from its joint venture with state-owned PdV. US crude imports from Venezuela averaged 212,000 b/d in January-August, US Energy Information Administration data show. Chevron's Venezuela output has stood at about 200,000 b/d. Neither president-elect Donald Trump nor his campaign addressed the Venezuela sanctions regime or indicated if they would change it. Republicans in Congress ahead of the election called for the Chevron exemption to be revoked. The Biden administration separately extended a prohibition for holders of $3.4bn in PdV 2020 bonds guaranteed by 50.1pc in US refiner Citgo's holding company to exercise their claim, this time until 7 March 2025. The PdV bondholders in theory hold a superior claim to Citgo Holding — a legal entity that directly owns Citgo and, in turn, is owned by Citgo parent company PdVH. A federal court in Delaware recently oversaw an auction of PdVH shares that yielded a $7.3bn bid from a company backed by investors including Elliott Investment Management. Legal wrangling over the bids and the distribution of auction proceeds is likely to keep Citgo ownership unresolved in the near term. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

Mexican peso plummets on Trump win


06/11/24
News
06/11/24

Mexican peso plummets on Trump win

Mexico City, 6 November (Argus) — The Mexican peso fell sharply against the US dollar as markets priced in potential retaliation against Mexico following former president's Donald Trump's victory in the US presidential election. "A Republican Senate majority and potential House win raise the chances of Trump's radical reforms, which could hurt Mexico's economic dynamism," said a financial analyst from Mexican bank Monex in a note today. The peso initially dropped around 3pc to Ps20.71/$1 early today, hitting a two-year low before recovering to Ps20.20/$1 by midday. The peso may weaken further, as Mexico is vulnerable to tariff hikes amid strained relations over issues like immigration and the opioid crisis, according to a desk report from a major Mexican bank. Trump repeatedly threatened tariffs on Mexico during his presidential campaign, most recently pledging a 25pc tariff on all Mexican imports unless President Claudia Sheinbaum's administration launches a severe crackdown on Mexico's drug cartels, which ship fentanyl and other drugs across the border to the US. Recent constitutional amendments in Mexico, including judicial reforms and proposed eliminations of independent regulators, may also add downward pressure on the peso, according to the report. "The government's goal to direct private-sector involvement could limit market forces," it noted. Mexico's state-owned oil company Pemex typically offsets peso depreciation due to its dollar-denominated oil export revenues, which help cover increased import costs. "Pemex's exports and domestic sales are tied to international hydrocarbon prices, providing a natural hedge," the company stated in its most recent report. Still, analysts warn that Pemex's focus on domestic refining over crude exports could erode this hedge, leaving it more exposed to foreign exchange swings on USD-denominated debt. By Édgar Sígler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Cop 29 finance talks need leadership after Trump win


06/11/24
News
06/11/24

Cop 29 finance talks need leadership after Trump win

Edinburgh, 6 November (Argus) — Donald Trump's US presidential election victory will likely affect finance negotiations during the UN Cop 29 climate summit starting next week, but the US can still play a role while other developed countries step up to the plate, according to observers. Key negotiations at Cop on a new finance goal for developing nations, the so-called NCQG, could be "severely undermined" by Trump's victory, as the prospect of Washington withdrawing from the Paris Agreement may discourage other countries from engaging with US officials, non-profit IISD's policy adviser Natalie Jones told Argus . Trump pulled the US out of the Paris Agreement during his last term in office, calling it "horrendously unfair", and he has signalled he will do so again. "This could potentially weaken ambitions" at Cop 29, but it is unlikely to derail negotiations, Jones said. Observers agree that the US can still play a role in talks on the new finance goal, a key topic at this year's summit. Parties to the Paris deal will seek to agree on a new finance goal for developing nations, following on from the current $100bn/yr target, which is broadly recognised as inadequate. "The Biden administration still has a critical window to support vulnerable nations' calls to mobilise climate finance and deliver a strong climate target," civil society organisation Oil Change International's US campaign manager Collin Rees told Argus . The Biden administration's delegation, which will still take part in Cop 29, will not change position at this stage, according to Jones. And the US could continue to show some leadership, she said, adding that Washington likely intends to release its 2035 Nationally Determined Contribution (NDC) early. Countries' new climate plans must be submitted to the UN climate body the UNFCCC by February 2025, but the US could release its NDC at Cop 29 before Trump takes power early next year, she said. "President Biden must do everything he can in the final weeks of his term to protect our climate and communities," including on fossil fuels, Rees said. The prospect of Trump pulling the US out of the Paris accord could cause initial anxiety at Cop 29, Climate Action Network executive director Tasneem Essop said. But "the world's majority recognises that climate action does not hinge on who is in power in the US". "As we saw before and will see again, other countries will step up if the US reneges on their responsibilities and stands back," Essop said. Trump's victory might also present the EU with an opportunity to strengthen its leadership among other developed countries, according to Jones. "It is really on the EU and other countries to step up now," she said. This is a view echoed by German Green lawmaker Michael Bloss, a member of the European Parliament's delegation at Cop 29. "Europe needs to become the adult in the room," Bloss told Argus . The EU cannot rely on the US anymore and must become a global climate leader to ensure success at Cop 29, he said. Meanwhile, Oil Change's Rees stressed that the NCQG is a collective goal. "Other major economies must now step forward to fill the gaps, much as they would have needed to in any scenario given how the US has long refused to pay its fair share," he said. By Caroline Varin and Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Iran sounds alarm on gasoline shortage


06/11/24
News
06/11/24

Iran sounds alarm on gasoline shortage

Dubai, 6 November (Argus) — The new Iranian government has sounded the alarm on an emerging gasoline shortage that looks set to get worse unless new policies are introduced to clamp down on runaway demand growth. Presenting a draft budget for the Iranian year starting on 20 March 2025, Iran's President Masoud Pezeshkian criticised the existing gasoline rationing system, calling it one of the major hurdles for the proposed bill. Iran has, since 2007, allowed citizens to buy base levels of gasoline at subsidised prices and any additional at a higher price. But the system failed to cap demand and imports sufficiently. In the proposed budget the government has signalled plans to ease shortages, but increasing prices is not on the agenda. A cut to subsidies in 2019 sparked nation-wide protests . "Today the cost of [producing] gasoline — which includes refining costs, transportation costs, and gas station maintenance costs — is about 8000 tomans (80,000 rials)," Pezeshkian said. But consumers only pay 7.5pc of the actual price of gasoline, according to Iran's oil ministry. Iran's gasoline consumption has reached a record high of around 750,000 b/d in the first seven months of the Iranian year that began on 20 March, according to the ministry. Domestic refinery capacity of 670,000 b/d has been unable to satisfy this. To bridge the gap Iran has turned to imports, which has not been easy for the heavily sanctioned country that buys the fuel at market prices. "Around 90 trillion tomans [$1.3bn at the free market rate] was spent to import gasoline this year, which could be increased to 130 trillion tomans [$1.9bn] next year if the [demand growth] trend continues," Pezeshkian warned. Supply-side response If Tehran is unwilling to raise pump prices it will have to add more supply. Work in underway to bringing online an additional fourth train at the Persian Gulf Star (PGS) condensate splitter, and on a 60,000 b/d splitter that made up just one part of the now shelved Siraf project. Consultancy FGE expects these projects to be commissioned by the end of 2025 or early 2026 and "potentially close the gap." The newly-appointed head of state-owned refining company NIORDC, Mohammad Sadegh Azimifar, said using CNG-powered vehicles could reduce the need for more gasoline production. "There are good legal capacities in the country for the development of CNG, including the approval of the energy optimization fund," he said. But CNG has lower mileage and energy content, and CNG filling stations are beset with long queues. "If you have a CNG car, you can only drive it for a day and one will have to wait in long queues to get it refilled, only for it to last for another day", said FGE's Middle East managing director Iman Nasseri. Iran has sufficient reserves of natural gas and LPG, but both of these failed to emerge as a good alternative fuel, he said. The Pezeshkian administration has repeated calls to increase use of public transport and modernise the country's vehicle fleet. But metros and buses are being utilised at maximum capacity and private vehicles are a favourable option in a country with the second-most discounted fuel prices in the world, Nasseri said. Iran is yet to tackle rampant fuel smuggling, with market sources indicating gasoline continues to be illegally shipped to neighbouring countries like Pakistan, Afghanistan and Kazakhstan. Earlier this week, authorities seized around 220,000l of smuggled fuel in several warehouses in Mashhad. While the administration strongly rebukes subsidies, with new vice president Mohammad Reza Aref calling them "unreasonable", they continue to look at solutions that does not include any increase in retail prices, in fear of a repeat of the 2019 protests. But with a lack of infrastructure to capitalize on CNG and limitations in public transportation system, the government may have no choice but to reconsider. By Rithika Krishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Iraq proposes doubling payment for KRG crude


06/11/24
News
06/11/24

Iraq proposes doubling payment for KRG crude

Dubai, 6 November (Argus) — Iraq's government has proposed doubling the amount it pays the Kurdistan Regional Government (KRG) for crude production and transportation costs, as it seeks a compromise aimed at resuming exports from the semi-autonomous northern region. The government on 5 November approved an amendment to the three-year budget passed in 2022, setting compensation at $16/bl. But this remains $10/bl below the KRG ministry of natural resources' calculation of production costs in contracts it signed with international oil companies (IOCs) operating in Iraqi Kurdistan. "The KRG is not yet on board with the new arrangement," a senior Iraqi source with knowledge of the matter told Argus . Another source, with knowledge of IOC thinking, described the move as "a positive development" and said companies are "waiting to see what the Iraqi parliament decides." Parliament must ratify the amendment. The amendment stipulates "production and transportation costs for each field will be estimated fairly by an internationally specialised consulting entity" to be selected mutually by Iraq's oil ministry and the KRG's ministry of natural resources within 60 days. "If no agreement is reached within this period, the Federal Council of Ministers will determine the consulting entity," the government said. Parliamentary finance committee member Narmin Maarouf said the decision is "an important step to resolve one of the outstanding issues between the Kurdistan region and Baghdad." Iraqi prime minister Mohammed Shia al-Sudani has been working on a middle ground agreement that would allow it to pay IOCs operating in Kurdistan in return for a compromise with the KRG and the IOCs over the recovery cost for oil produced in the region. In this case, the KRG has to hand over its crude oil production to state-owned marketing firm Somo. A senior Iraqi government official said told Argus the result of the US presidential election may shift things in Iraq, "but the decision is clear, the Iraqi government wants to solve the issue." Around 470,000 b/d of crude exports from Kurdistan have been absent from international markets since March 2023, when Turkey closed the pipeline linking oil fields in northern Iraq to the export terminals at Ceyhan. That followed an international tribunal ruling that said Ankara had breached a bilateral agreement with Baghdad by allowing KRG crude to be exported without the federal government's consent. Iraq's federal government is finding it difficult to strike a balance between repairing its rift with the KRG and complying with its Opec+ commitments. But the KRG "cannot immediately resume exporting around 400,000 b/d," the Iraqi source said. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more