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Maduro foes press White House to save Citgo: Update

  • Spanish Market: Crude oil, Oil products
  • 02/10/19

Adds background from officials close to Guaido.

Venezuela's increasingly anxious political opposition is lobbying the White House to take executive action to block bondholders owed more than $900mn from seizing control of US refiner Citgo.

Venezuela's national oil company PdV, Citgo's parent company, had put up shares in the refiner as collateral on PdV 2020 bonds, which are the Opec producer's only debt instrument not in default. A payment on the bondholder debt is due before the end of the month.

Juan Guaido, head of Venezuela's opposition-controlled National Assembly who is also recognized by many countries as interim president, has administrative control over Citgo, even though PdV remains in the hands of his foe, Venezuelan president Nicolas Maduro.

"If Citgo is lost to Maduro's bondholders, the only one to benefit will be Maduro, and not Juan Guaido and the cause of democracy in Venezuela," Luisa Palacios, chair of the Guaido-appointed Citgo board, said this morning at an energy conference in Washington, organized by the Inter-American Dialogue.

The US government authorized the Guaido-led administration to tap into PdV's frozen US funds to pay $72mn in interest on the bonds in May. But payment due on 27 October is a more daunting $842mn in principal and $72mn in interest. The amortization payment has no grace period, unlike the interest, which has a 30-day cushion.

After providing support to ensure that Citgo is controlled by the Guaido authority rather than Maduro, "it would seem contradictory not to save Citgo from Maduro's bondholders," Palacios said.

Placing Citgo under the control of the National Assembly was a key accomplishment for Guaido, Palacios said. "To continue his story, we need continued support from the US administration."

The holders of the PdV 2020 bonds include staid Wall Street institutions such as Fidelity and T Rowe Price. Some of the firms have quietly offered to refinance the bond principal with the Guaido-led administration, and exploratory talks have taken place, according to a senior opposition official. But no deal has been reached.

According to another official close to Guaido, a negotiated refinancing of the bond obligations is the preferred approach, but if an agreement cannot be hammered out with the institutional investors, an executive order from the White House would be the next best outcome. A more remote possibility for Guaido's team is a court challenge of the validity of the bonds, which did not receive the requisite approval of the National Assembly when they were issued in 2016.

The final option is seen as a long shot, since the opposition already paid interest in the bond back in May. But either way, a Wall Street executive says the Guaido team has waited until perilously close to the payment deadline to try to find an off ramp for its obligations.

The US imposed oil sanctions on Venezuela in late January, shortly after Guaido declared himself acting president, a claim Washington and Latin American allies quickly recognized.

But the oil sanctions, which compound expanding financial and targeted individual sanctions, did not bring about the swift political transition that Washington had been expecting. As the year draws down and the White House focuses inward on possible presidential impeachment, Guaido is losing popular support at home, where a humanitarian crisis is unfolding, as well as the attention of some of his most vocal backers in Washington. In the region, stalwart ally Argentina is moving into more neutral ground on the Venezuelan issue.

The shifting political winds have not been lost on Guaido's cadre of exiles. At this morning's packed event, Palacios said the sanctions have helped "significantly" and celebrated their "very creative" design that has effectively carved out Citgo from operational impact. But she warned of a "loophole" that was "created and put in place when the Maduro regime was in charge of Citgo, and it was meant to not allow the Maduro regime to hide under the sanctions system as an excuse to not pay its debt. It was actually rational given the moment. But because the loophole remains, it would do exactly the opposite of what it was meant to do," she said.

The "loophole" cited by Palacios is a July 2018 guidance from the US Treasury Department's Office of Financial Assets Control (OFAC) clarifying that existing US sanctions will not impede the enforcement of court-ordered seizures of Venezuelan oil assets or gaining access to shares of Citgo pledged as collateral. OFAC clarified in January, after the US recognized Guaido as Venezuela's interim leader, that the guidance remained in effect.

OFAC, which enforces US sanctions programs, does not comment on possible changes to its programs. But a subtle revision of OFAC guidance may prove to be a more plausible procedural step than ring-fencing Citgo from influential creditors through a high-profile White House executive order.

Other creditors are aggressively pressing their own claims. A US District Court in Delaware late last month lifted a stay on proceedings that would allow Citgo shares to be sold to satisfy a $1.2bn arbitration claim by Crystallex, a former Canadian mining firm owned by US hedge fund Tenor Capital Management. But in that case, Citgo is effectively protected by US sanctions.

The Guaido team's defense of Citgo moved into more formal territory yesterday, with National Assembly authorization of the one-time use of up to $2mn in PdV's funds embargoed in the US "only and exclusively for the payment of professional fees needed to meet the most urgent and prioritized need to defend its assets extra-judicially and judicially."

The controversial move could not have been made without tacit US government approval.

It is not clear how much money PdV has embargoed in US banks, but the US government appears to be reluctant to release it. Critics say whatever is available should be directed to desperately needed food and medicine in Venezuela, rather than foreign lawyers.

Guaido's team of Venezuelan exiles are mostly working pro bono, creating strains among technical staff. The US Agency for International Development has provided some funds to pay salaries and cover administrative expenses.

Citgo, considered Venezuela's most valuable remaining asset, has 750,000 b/d of capacity across three US refineries, in addition to associated pipelines and terminals.


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22/11/24

Singapore light distillate stocks hit seven-week high

Singapore light distillate stocks hit seven-week high

Singapore, 22 November (Argus) — Singapore light distillate and middle distillate inventories rose to multi-week highs while residual fuel stocks fell to a three-week low for the week ending 20 November, according to Enterprise Singapore. Singapore's light distillates stocks rose to a seven-week high, boosted by increased naphtha imports and an onslaught of gasoline cargoes from Saudi Arabia into the city-state. Naphtha imports rose by 21pc on the week to 1.98mn bl. Kuwait, India, and the UAE were the top three suppliers to Singapore this week. Kuwait likely exported more naphtha to Asia this month, as an issue at its reformer resulted in more spare naphtha on hand for exports. More Saudi Arabian gasoline cargoes entered Singapore, adding to stocks. Singapore received another 800,000 bl of gasoline from the Mideast Gulf nation after already receiving similar volumes last week. Middle distillates stocks rose further to a six-week high, as jet fuel exports fell while imports rose. Swing supplies of jet fuel continued to arrive from India, with a 494,000 bl India jet fuel cargo imported into Singapore in the past week. Singapore's onshore fuel oil inventories retreated to a three-week low after climbing for two consecutive weeks, as imports fell sharply this week. But total inventories for November remained marginally higher at 17.78 mn bl,compared to 17.55 mn bl last month. Brazil, Indonesia, and Iraq were the top origin countries for fuel oil arrivals, while the majority of exports were bound for the Philippines and Hong Kong. No exports were recorded to China this week. By Aldric Chew, Asill Bardh, Cara Wong and Lu Yawen Singapore onshore stocks (week to 20 November '24) Volume ± w-o-w ± w-o-w (%) Light distillates Stocks 15.16 1.04 7.37 Naphtha imports 1.98 0.35 21.36 Naphtha exports 0.61 0.60 8,689.57 Gasoline imports 3.04 -0.53 -14.91 Gasoline exports 4.74 -0.35 -6.91 Middle distillates Stocks 10.27 0.63 6.56 Gasoil imports 0.61 -1.12 -64.79 Gasoil exports 3.48 1.36 63.82 Jet fuel imports 0.5 0.1 39.34 Jet fuel exports 0.20 -0.28 -58.34 Residual fuels Stocks 16.98 -1.37 -7.45 Fuel oil imports 2.19 -4.36 -66.61 Fuel oil exports 1.23 -2.04 -62.53 Source: Enterprise Singapore Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Pemex's lean Zama spending undercuts goals


21/11/24
21/11/24

Pemex's lean Zama spending undercuts goals

Mexico City, 21 November (Argus) — State-owned oil company Pemex's limited budget for developing one of Mexico's most-promising new oil fields is putting Mexico's crude production and refining goals at risk through 2030. First production from the Zama field will likely not start until at least 2028 instead of late next year, as forecast earlier, based on a timeline in a recent presentation from Pemex. Pemex continues to work on the basic engineering for the Zama field because of the lack of cash, staff of hydrocarbon regulator CNH said last week. The latest delay on Zama echoes criticism from when Pemex took over operating the field in 2022 that it did not have sufficient experience or funds to carry on with the project, said industry sources. "Unfortunately, the Pemex budget is always a shadowy mystery," said a person close to the project who asked not to be named. "There is no transparency or certainty regarding when they do and do not honor payment commitments." Zama is a shallow-water field unified in 2022 between Pemex area AE-152-Uchukil and the discovery made in 2017 by a consortium led by US oil company Talos Energy. Pemex holds 50.4pc of the Zama project while Talos and Slim's subsidiary Grupo Carso have 17.4pc, German company Wintershall Dea 17.4pc and British company Harbour Energy 12.4pc. The state-owned company expects to spend $370.8mn to develop Zama in 2025, 64pc less than the original $1.05bn budget proposed by Pemex for next year, according to data from CNH. The regulator cleared the change last week, but commissioners questioned the CNH staff about the new delays. Pemex's original development plan showed that the company forecast the first crude production by December 2025, with 2,000 b/d and about 4mn cf/d of gas. The original plan forecast Zama hitting peak production of 180,000 b/d in 2029, making it Mexico's second-largest crude producer, only under the Maloob field. President Claudia Sheinbaum and Pemex's new new chief executive Victor Rodriguez flagged the importance of shallow-water field Zama and ultra deep field Trion to support Pemex's oil production target of 1.8mn b/d in the upcoming six years in a presentation last week. Pemex's new plan is focused on feeding its own refining system rather than crude exports. The company expects to increase gasoline, diesel and jet fuel production by 343,000 b/d, according to the plan, but it did not give a timeline. Pemex produced 491,000 b/d of gasoline, diesel and jet fuel in the first nine months of 2024. Mexico's proposed 2025 federal budget also shows lower spending for Zama, at Ps3.1bn ($154mn) for 2025, even less than the figure approved by CNH on 14 November. Neither Pemex not Talos responded to requests for additional comment. "Zama is the story of the triumph of ideology over practicality," said a Pemex source who asked not to be named. The state-owned company is studying how to bring in new investors to the project once congress approves secondary laws to implement recent energy reforms, the source said. But uncertainty over the legal framework and the general deterioration of Mexico's business climate will make this more difficult, the Pemex source added. The involvement of Mexican billionaire Carlos Slim, who acquired 49.9pc of Talos Energy share in Zama last year, brought new hopes that work at Zama could finally accelerate. Instead, Slim's entrance slowed the project, as the new partner had to review the project, a former regulator who asked not to be named said. Talos Energy, the lead operator when the field was discovered over seven years ago, is now "frustrated" by the poor progress of the project. "We have Mexico, a great discovery in Zama, we're seven years into it, and still have not made a final investment decision on it," said Talos Energy interim chief executive Joseph Mills, in a conference call with investors last week. "So a lot of frustration there, as you can imagine." By Édgar Sígler Pemex 2024 crude output, throughput '000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cost of government support for fossil fuels still high


21/11/24
21/11/24

Cost of government support for fossil fuels still high

London, 21 November (Argus) — The cost of government measures to support the consumption and production of fossil fuels dropped by almost third last year as energy prices declined from record highs in 2022, according to a new report published today by the OECD. But the level of fiscal support remained higher than the historical average despite government pledges to reduce carbon emissions. In an analysis of 82 economies, data from the OECD and the IEA found that government support for fossil fuels fell to an estimated $1.1 trillion in 2023 from $1.6 trillion a year earlier. Although energy prices were lower last year than in 2022, countries maintained various fiscal measures to both stimulate fossil fuel production and reduce the burden of high energy costs for consumers, the OECD said. The measures are in the form of direct payments by governments to individual recipients, tax concessions and price support. The latter includes "direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates", the OECD said. These government interventions come at a large financial cost and increase carbon emissions, undermining the net-zero transition, the report said. Of the estimated $1.1 trillion of support, direct transfers and tax concessions accounted for $514.1bn, up from $503.7bn in 2022. Transfers amounted to $269.8bn, making them more costly than tax concessions of $244.3bn. Some 90pc of the transfers were to support consumption by households and companies, the rest was to support producers. The residential sector benefited from a 22pc increase from a year earlier, and support to manufacturers and industry increased by 14pc. But the majority of fuel consumption measures are untargeted, and support largely does not land where it is needed, the OECD said. The "under-pricing" of fossil fuels amounted to $616.4bn last year, around half of the 2022 level, the report said. "Benchmark prices (based on energy supply costs) eased, particularly for natural gas, thereby decreasing the difference between the subsidised end-user prices and the benchmark prices," it said. In terms of individual fossil fuels, the fiscal cost of support for coal fell the most, to $27.7bn in 2023 from $43.5bn a year earlier. The cost of support for natural gas has grown steadily in recent years, amounting to $343bn last year compared with $144bn in 2018. The upward trend is explained by its characterisation as a transition fuel and the disruption of Russian pipeline supplies to Europe, the report said. By Alejandro Moreano and Tim van Gardingen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Talks in Baku torn between mitigation and finance


21/11/24
21/11/24

Cop: Talks in Baku torn between mitigation and finance

Edinburgh, 21 November (Argus) — Developing and developed nations remain at loggerheads on what progress on climate finance and mitigation — actions to cut greenhouse gas emissions — should look like at the UN Cop 29 climate summit. But Cop 30 host Brazil has reminded parties that they need to stick to the brief, which is finance for developing countries. Concluding a plenary where parties, developed and developing, listed grievances, environment minister Marina Silva recognised "the excellent progress achieved" on mitigation at Cop 28. She listed paragraphs of the Cop 28 deal, including the energy package and its historic call to transition away from fossil fuels in energy systems. "We are on the right track," she said, talking about mitigation, but "our greatest obligation at this moment is to make progress with regard to financing". "This is the core of financing that will pave our collective path in ambition and implementation at Cop 30," Silva said, adding that $1.3 trillion for developing countries should be "the guiding star of this Cop". Parties are negotiating a new collective quantified goal (NCQG) — a new climate finance target — building on the $100bn/yr that developed countries agreed to deliver to developing countries over 2020-25. But developed countries insist that a precise number for a goal can only be produced if there is progress on mitigation and financing structure for the NCQG. "Otherwise you have a shopping basket but you don't know what's in there," EU energy commissioner Wopke Hoekstra said. Some developing nations said they need the "headline number first". Some developing countries, including Latin American and African nations as well as island states, have also complained about the lack of mitigation ambition. Cop is facing one of the "weakest mitigation texts we have ever seen," Panama said. But they also indicated that financial support was missing to implement action. Developed countries at Cop 29 seek the implementation of the energy pledges made last year. "What we had on our agenda was not just to restate the [Cop 28] consensus but actually to enhance and to operationalise that," but the text goes in the opposite direction, Hoekstra said, talking about the latest draft on finance. Whether hints that Brazil has mitigation in focus for next year's summit will be enough to assuage concerns from developed countries at Cop 29 on fossil fuel ambitions remains to be seen. The communique of the G20, which the country hosted, does not explicitly mention the goal to transition away from fossil fuels either. The developed countries' mitigation stance grew firmer after talks on a work programme dedicated to mitigation, the obvious channel for fossil fuel language, was rescued from the brink of collapse last week. Discussions have stalled, but another text — the UAE dialogue which is meant to track progress on the outcomes of Cop 28 — still has options referring to fossil fuels. But in these negotiations too, divisions remain. "The UAE dialogue contains some positive optional language on deep, rapid and sustained emissions reductions and the [Cop 28] energy package, climate think-tank E3G said. But Saudi Arabia has made clear that this was unacceptable, while India, which worked to water down a coal deal at Cop 26, is pushing back on the 1.5°C temperature limit of the Paris Agreement. Negotiators are starting to run out of time. Draft after draft, the divide fails to be breached with no agreement on an amount for the finance deal. "We cannot talk about a lower or higher number because there is no number," noted Colombia's environment minister Susana Muhamad. The next iteration should have numbers based on the Cop 29 presidency's "view of possible landing zones". The fact that the draft text on finance has no bridging proposal is a concern, non-profit WRI director of international climate action David Waskow said. Finance was always meant to be the centrepiece of Cop 29. Parties have not formally discussed the goal in 15 years, and have been trying to prepare for a new deal through technical meetings for the past two years. But the discussion needs to end in Baku. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Shell will supply Brussels airport with SAF via DHL


21/11/24
21/11/24

Shell will supply Brussels airport with SAF via DHL

London, 21 November (Argus) — Shell and German logistics group DHL Express have signed a one-year deal for the supply of 25,000t of sustainable aviation fuel (SAF) at Brussels airport. Shell will deliver the SAF via pipeline to the airport. The SAF will be co-processed, meaning it will be produced in a fossil refinery by replacing fossil crude oil with renewable feedstocks. It will be certified by the international sustainability and carbon certification (ISCC) programme. DHL Express customers will be able to claim verified emission reductions (VER) carbon credits linked to the use of the SAF through DHL's book and claim model . DHL recently signed a supply agreement with US-based fuel supplier World Fuel Services for the latter to supply Miami International Airport with around 227mn l of blended SAF — 68mn l of which will be pure SAF — over a two-year period. DHL said it consumed 72,000t of SAF in 2023 for its Scope 1 operations — which refer to a company's direct emissions, becoming one of the top three SAF buyers globally. This amounts to around 15pc of global annual SAF output, based on the International Air Transport Association's estimate of around 500,000t of SAF produced in 2023. By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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