Venezuela hurtles toward electoral abyss

Spanish Market: Crude oil, Oil products
09/06/20

The two sides in Venezuela's protracted political conflict are racing to name new electoral authorities in anticipation of key National Assembly elections that could determine the fate of US-backed opposition leader Juan Guaido.

Venezuela's US-sanctioned government already took a key step toward stripping Guaido of his constitutional claim to an interim presidency that is recognized by dozens of Western countries. In a 26 May ruling, the country's rubber-stamp supreme court ratified a parallel assembly leadership headed by Luis Parra, who received the written ruling today.

Guaido's leadership of the assembly, considered Venezuela's last democratic institution, underpinned his January 2019 declaration of an interim presidency, with the ambitious goal of forcing President Nicolas Maduro to step down.

"If Guaido is not legitimately the National Assembly president in 2020, then he cannot constitutionally maintain his self-proclaimed fiction that he is the constitutional interim president of Venezuela," a presidential palace official told Argus.

Parra, who was expelled from the opposition Primero Justicia party (PJ) in December 2019 for allegedly participating in a vote-buying scandal, caucused with the government's United Socialist Party (PSUV) minority in the legislature in January to claim the assembly presidency in a military-backed maneuver that prevented most of Guaido's supporters from casting any votes. Russia, Maduro's main foreign patron, recognized Parra's victory.

A Parra aide tells Argus the new assembly leadership's first priority is to secure supreme court support to appoint a new electoral council board (CNE). A new board would then move to organize assembly elections that are constitutionally mandated to take place by December.

The elections could be held earlier to "expedite the legislature's return to its normal deliberative status," Parra's aide said.

The loss of Guaido's constitutional claim means all of his "ad hoc" diplomatic and state-owned corporate appointments "are now also null and illegal" the aide added, referring specifically to exile boards of Venezuela's national oil company PdV and its US refining arm Citgo.

The Guaido-led assembly, which was forced to meet at remote locations outside of the legislative palace after January and now meets virtually because of coronavirus restrictions, today reaffirmed its own plan to name a new CNE board through a committee of 11 deputies and 10 civil society members.

"Any electoral authority that is not named by the legitimate National Assembly will be rejected and unrecognized by Venezuela and the democratic world," the assembly said today.

But the opposition, comprised of four political parties, is divided over whether to participate in the elections at all, unless free and fair conditions can be guaranteed. Maduro won a second term in Venezuela's last election in May 2018, a process that was widely deemed to be fraudulent.

The US, which imposed oil sanctions on Venezuela shortly after Guaido claimed the interim presidency, blasted what it called the "sham" court ruling last month.

"Maduro is counting on a distracted international community to overlook this move to further destroy Venezuelan democratic institutions and consolidate power," the State Department said. "Parra and his gang have forsaken their representation of the Venezuelan people and instead represent the regime's corrupt inner circle and their misguided quest to maintain power."

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07/11/24

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.

Mexican peso plummets on Trump win

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.

Cop 29 finance talks need leadership after Trump win

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.

Iran sounds alarm on gasoline shortage

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.

Iraq proposes doubling payment for KRG crude

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.

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