PdV directs scarce fuel to Caracas, closes pumps

Venezuela's state-owned PdV is diverting scarce fuel stocks to Caracas and has closed roughly a third of its 1,765 service stations across the country as pumps run dry.

Along the lengthy border with Colombia, PdV service stations are shut down to curb sales and smuggling, station operators in Apure, Bolivar, Táchira and Zulia tell Argus.

At the border stations that remain open, police and national guards are deployed to avert any backlash from weary drivers forced to wait for days for a partial tank of gasoline or diesel.

First-hand reports from station operators in hard-hit states including Apure, Bolivar, Lara, Mérida, Táchira, Trujillo and Zulia belie PdV's official assurances that fuel supply is adequate.

Seven operators in Apure, Táchira and Zulia where security forces are supervising sales say they have witnessed numerous instances of security personnel extorting cash from drivers of buses and trucks in exchange for priority fueling.

Black market fuel sales are flourishing throughout the interior. Vendors are offering five-gallon containers for the equivalent of up to $10 apiece, or $2/USG, in a country where fuel is virtually given away at nominal prices. In the devalued local currency, 10,000 USG of gasoline costs one dollar at the official retail price.

PdV since last week is capping sales in the interior of the country at five to eight USG per vehicle in an effort to contain panic buying and extend shrinking supplies while it works to repair key refining units.

Unofficially, the oil ministry estimates that gasoline consumption has dropped below 120,000 b/d this month compared with peak consumption of 315,000 b/d in 2010.

Diesel consumption has dropped from a peak of 249,000 b/d in 2013 to about 100,000 b/d currently.

But an oil ministry official tells Argus the unofficial consumption estimates do not take into account continued fuel smuggling of at least 30,000 b/d to Colombia. The lucrative smuggling operations are controlled mainly by corrupt National Guard and army officials working in league with elements of the Colombian insurgent group ELN taking refuge in Venezuelan territory.

The 635,000 b/d Amuay refinery, once considered one of the world's largest and most modern refineries, is processing about 110,000 b/d of crude this week. The 305,000 b/d Cardón refinery is shut down because of equipment breakdowns and unstable electricity supply. PdV hopes to restart Cardón by end of May to help ease the fuel deficit. The two refineries form the CRP downstream complex in Falcón state.

The 140,000 b/d El Palito refinery on the coast of Carabobo state and 190,000 b/d Puerto La Cruz in Anzoátegui state are not operating.

Oil ministry and PdV officials responsible for domestic fuel distribution said the deficit is the worst Venezuela has experienced since a watershed oil strike in December 2002-January 2003 shut down almost 90pc of PdV's upstream and downstream operations nationwide.

PdV so far in May has imported less than 85,000 b/d of mainly motor fuel compared with last month's average imports of over 225,000 b/d, a PdV marketing official tells Argus.

"When US sanctions were tightened on 28 April, potentially threatening non-US companies that do business with the US or transact any business through the US financial system, even suppliers like Spain's Repsol and India's Reliance have temporarily halted fuel deliveries to Venezuela," the official said.

"Our options are very limited. Either we import more fuel or we recover domestic production and at least restart production at the CRP. If we cannot do either of these things quickly, Venezuela will run out of fuel, and local food distribution which depends completely on motor vehicles will stop and we will have a famine."

Veteran oil union leader Ivan Freites, an outspoken supporter of opposition leader Juan Guaidó, notes that PdV's crude production has declined to its "lowest level since the early 1940s, its local refineries are barely 10pc operational, power is unstable particularly in Zulia and the Andean region, most of PdV's fuel tanker trucks are down, and US sanctions are hindering fuel imports from the few suppliers and tanker operators still working with the company."

A resolution approved yesterday by the opposition-controlled National Assembly presided by Guaidó blames the government for the collapse of production, the refinery breakdowns and rampant smuggling to Colombia that it says costs Venezuela about $1bn in annual lost revenues.

Restoring oil operations cannot begin until "the usurper" Maduro and PdV's current board of directors led by oil minister and PdV chief executive Manuel Quevedo are replaced by a new democratically elected government, the assembly's resolution says.

The assembly was rendered powerless by Maduro after the opposition won a majority of the seats in a 2015 election.