US may reimpose Venezuela oil sanctions

Spanish Market: Crude oil
29/11/23

The US' lifting of sanctions against Venezuela's oil sector may prove to be rather brief, as Washington is threatening to reimpose some of the economic restrictions it waived barely six weeks ago.

Washington is keeping Caracas to a 30 November deadline to meet political conditions associated with a waiver from US sanctions that have been in effect since 2019. President Joe Biden's administration has demanded the release of three US citizens held in detention in Venezuela and the lifting of restrictions that prevent key opposition leaders from contesting next year's presidential elections.

Venezuelan president Nicolas Maduro so far appears to have shrugged off the US threat. In a speech on 27 November, Maduro made no mention of the US conditions and instead called for the US to lift all sanctions against Venezuela "permanently and definitively, and that we begin a new time, a new era of relations of respect and collaboration, at the highest level, between the US and Venezuela."

Venezuela released five political prisoners soon after the agreement, but no more since then, and the US is particularly keen to force the release of US citizens and permanent residents held in Venezuela. A Venezuelan court on 30 October suspended results of the political opposition's primary, which selected former lawmaker Maria Corina Machado as the main opposition contender for the 2024 presidential election.

The sanctions waiver, issued on 18 October, was meant to last until 18 April 2024, with a promise of extension if the Maduro government made good on its agreement with the opposition to allow a truly competitive presidential and parliamentary elections by the end of 2024.

The White House has already warned US and foreign companies not to get their hopes up about possible return to Venezuela. The sanctions waiver should not be seen as encouragement to resume full operations in that country, US sanctions enforcers said earlier this month, noting that oil companies can choose to have a more limited footprint.

Market impacts

Even in the best-case scenario of continued sanctions relief, Venezuela's near term output was not expected to increase by more than 200,000 b/d, from about 800,000 b/d currently. In practice, foreign producers that already had separate waivers to maintain limited operations in Venezuela, including Chevron, Italy's Eni and Spain's Repsol, would have been best positioned to take advantage of the thaw in US-Venezuela relations.

France-based upstream oil and gas producer Maurel and Prom said earlier this month that it would resume operations in Venezuela following the lifting of US sanctions. Other US and European producers that were not already up and running in Venezuela may be reluctant to make significant investments, given the uncertainty as to whether the sanctions relief will be extended.

Brazil's state-controlled Petrobras said it was weighing investment in Venezuela following the lifting of US sanctions, without announcing specific projects. Bolivia and Venezuela likewise announced unspecified plans for joint refining, oil production and petrochemical projects.

The sanctions waiver also allowed Trinidad and Tobago to proceed with plans to receive natural gas from Venezuela's offshore Dragon field.

Revoked waiver may slow flows, raise rates

Venezuelan crude shipments to Europe picked up since the waiver of US sanctions, as Eni and Repsol appear to be taking more cargoes under existing oil-for-debt swaps. The pace of US-bound shipments has not changed since mid-October.

The reimposition of US sanctions most likely would preserve a previously granted waiver that allowed only Chevron to lift US-bound Venezuelan cargoes, and only those produced from Chevron's joint venture with PdV. US crude imports from Venezuela averaged 120,000 b/d in January-August, according to the US Energy Information Administration.

The latest Venezuelan crude shipments to China have been hauled on the mainstream global very large crude carrier (VLCC) fleet, in a departure from the pre-sanctions waiver practice of using "shadow fleet" vessels. A revocation of the waiver could pressure VLCC rates in the US Gulf coast, Caribbean, Brazil and west Africa.

A possible revocation of the US waiver likely would push up WCS/Castilla differentials for delivered China crude, which have fallen since mid-October because of competition from Merey. Merey differentials could again widen, after narrowing to $11/bl from $20/bl in mid-October (see chart).

By Haik Gugarats, Tray Swanson and Carlos Camacho

Heavy sour crude delivered China ($/bl)

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21/11/24

Cop: EU, four countries commit to 1.5°C climate plans

Baku, 21 November (Argus) — The EU, Canada, Mexico, Norway and Switzerland have committed to submit new national climate plans setting out "steep emission cuts", that are consistent with the global 1.5°C temperature increase limit sought by the Paris Agreement. The EU and four countries made the pledge at the UN Cop 29 climate summit in Baku, Azerbaijan today, and called on other nations to follow suit — particularly major economies. Countries are due to submit new climate plans — known as nationally determined contributions (NDCs) — covering 2035 goals to the UN climate body the UNFCCC by early next year. The EU, Canada, Mexico, Norway and Switzerland have not yet submitted their plans, but they will be aligned with a 1.5°C pathway, EU climate commissioner Wopke Hoekstra said today. The Paris climate agreement seeks to limit the global rise in temperature to "well below" 2°C and preferably to 1.5°C. Canada's NDC is being considered by the country's cabinet and will be submitted by the 10 February deadline, Canadian ambassador for climate change Catherine Stewart said today. Switzerland's new NDC will also be submitted by the deadline, the country's representative confirmed. Pamana's special representative for climate change Juan Carlos Monterrey Gomez also joined the press conference today. Panama, which is designated as carbon negative, submitted an updated NDC in June. It is planning to submit a nature pledge, Monterrey Gomez said. "It is time to streamline processes to get to real action", he added. The UK also backed the pledge. The UK announced an ambitious emissions reduction target last week. The UAE — which hosted Cop 28 last year — released a new NDC just ahead of Cop 29, while Brazil, host of next year's Cop 30, released its new NDC on 13 November during the summit. Thailand yesterday at Cop 29 communicated a new emissions reduction target . Indonesia last week said that it intends to submit its updated NDC ahead of the February deadline, with a plan placing a ceiling on emissions and covering all greenhouse gases as well as including the oil and gas sector. Colombia also indicated that its new climate plan will seek to address fossil fuels, but it will submit its NDC by June next year . By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: EU says finance draft text not acceptable

21/11/24

Cop: EU says finance draft text not acceptable

Baku, 21 November (Argus) — The latest draft of the text on climate financing presented at the UN Cop 29 climate summit is not ambitious enough on mitigation — reducing emissions — and "clearly unacceptable," EU energy commissioner Wopke Hoekstra said today. Parties must agree at Cop 29, in Baku, Azerbaijan, on 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. The text is the main outcome for the summit. "What we had on our agenda was not just to restate the [Cop 28] consensus but actually to enhance that and to operationalise that," but the text goes in the opposite direction, Hoekstra said. Parties to last year's Cop 28 summit in Dubai made an historic pledge to "transition away" from all fossil fuels. The EU has warned against any backsliding on this pledge . "We cannot accept the view that the previous Cop did not happen," Hoekstra said. A draft text on the mitigation work programme — a process that focuses on emissions reduction — was released by the Cop 29 presidency in the early hours of this morning. It does not mention phasing out or reducing fossil fuels in energy systems, or reference the agreement reached on the latter point at Cop 28 last year. Hoekstra indicated today's text does not provide enough clarity to allow the EU to put a concrete number on the amount of climate finance that should be available. The bloc has insisted the final number for climate financing can come only when other elements, including the structure and contributor base, are settled. But recipient country groups such as the G77 and Like-Minded Developing Countries (LMDC) groups have expressed impatience at the lack of a concrete number. Minor bright spots in the numerous draft texts released overnight include those on Article 6, which governs international carbon credits, Hoekstra said. But the commissioner is "sure there is not a single ambitious country who thinks this is nearly good enough." By Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexico to keep some energy regulator independence

20/11/24

Mexico to keep some energy regulator independence

Mexico City, 20 November (Argus) — Mexico's lower house constitutional affairs commission changed its draft bill on eliminating independent regulators to keep the energy regulatory commission (CRE) independent on technical issues even after the energy ministry absorbs it. In an earlier draft, respective ministries would take over the functions of previously independent regulators. With the change, CRE will become a "decentralized body," said President Claudia Sheinbaum. It will retain technical independence but will no longer be an autonomous regulator able to set its budget, the president added. Sheinbaum did not mention hydrocarbons regulator CNH, which could take up a similar position as CRE. Antitrust watchdog Cofece and telecommunications regulator IFT would become similarly decentralized bodies with technical independence from the economy ministry. Transparency watchdog Inai will disappear but a new anticorruption ministry will take over its functions. Inai in recent years has forced state-owned oil company Pemex to release more detailed data about harmful emissions and fuel theft, among other issues. Mexico's independent regulators and watchdogs still formed part of the 2025 budget proposal the government revealed this week. The actual independence of Mexico's energy regulators has been questioned since the previous government, as the number of permits granted by CRE to private companies has dropped in favor of state-owned companies . Critics have raised concerns regarding the bill, arguing it will destabilize Mexico's balance of power and undermine investor confidence. The proposal also fueled concerns that this change could weaken Mexico's standing in the 2026 review of the US-Mexico-Canada free trade agreement (USMCA), as the US and Canada may see the exit of independent regulators as a risk to their business interests in Mexico. Sheinbaum said she met with US president Joe Biden and Canadian president Justin Trudeau during the G20 summit and discussed the importance of the USMCA. She did not mention any concerns the trade partners had regarding the bill. Morena previously tried to absorb the independent regulators early on during the previous administration. The ruling party saw its efforts strained because it lacked the two-thirds supermajority required to pass constitutional changes. Morena and its allies are now expected to secure the votes swiftly, as they have passed other constitutional reforms in the previous weeks. By Cas Biekmann Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Baghdad clamps down on 'illegal' oil smuggling to Iran

20/11/24

Baghdad clamps down on 'illegal' oil smuggling to Iran

Singapore, 20 November (Argus) — The Iraqi government is clamping down on the "illegal smuggling" of crude, bitumen and other oil products to Iran. Iraq's foreign affairs ministry has asked Iranian authorities to stop trucks carrying "oil, black oil and other petroleum products" from entering Iran through border crossing areas in Iraq's semi-autonomous Kurdistan region unless the exports are licensed by state-owned Somo, according to a 12 November letter seen by Argus . The movement of bitumen and other oil products across the Haj Omran-Piranshahr border point have already halted because of the new directive, market sources said. "The Parwiz Khan and Bashmakh borders are still exporting bitumen, but if this letter is implemented fully, Iraq's bitumen exports will be disrupted since none of these producers possess a Somo licence," an Iraqi bitumen market participant told Argus . The restrictions are expected to remain in place until further notice, although some market participants expressed doubt about how effective the crackdown will be. The directive will also have a bearing on crude producers in Iraq's Kurdistan region, which have been relying on local sales since a key export pipeline to Turkey was shut last year. Foreign operators operating in Kurdistan said they have been trucking crude to local refineries since the closure, but Argus understands that Kurdish crude is also being smuggled — by truck — across the border to Turkey, Iran and Syria. Iraq's oil ministry said this month that it has secured a commitment from the Kurdistan Regional Government (KRG) to scale back its crude production to "agreed levels" to help bring overall Iraqi output back below its Opec+ production target. Tight supply Participants in Iraq's bitumen market note that the smuggling directive coincides with already tight domestic supply, caused by limited availability of vacuum residue feedstock. Not only are higher margins encouraging Iraqi refineries to blend vacuum residue to produce high-sulphur fuel oil (HSFO), but a prolonged roadblock between Erbil and Sulaymaniyah, which started before the Kurdish election in October, has made it difficult for bitumen producers to transport vacuum residue from refineries to their production units, market participants said. Manifest charges were decreased to $10/t last week to encourage bitumen producers to transport vacuum residue, down from $35/t when the roadblock started. But most Kurdish suppliers have refrained from offering fresh cargoes for export in the past three weeks. A few Indian importers told Argus that it has become increasingly difficult to secure Iraqi bitumen drums because of a lack of offers. Some bitumen suppliers took to the sidelines in the expectation that export values will increase in line with rising Iranian seaborne prices. The limited availability of vacuum residue has boosted production costs for Iraqi bitumen suppliers. Iraqi drums will be offered higher than $340/t fob Bandar Abbas in the coming days, compared with around $322-325/t last week, producers said. One major southern Iraq-based producer has not been offering drummed cargoes since the end of October as the higher production costs have made export prices less competitive for major consumers like India, market participants said. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: EU warns on fossil fuel ambition backsliding

20/11/24

Cop: EU warns on fossil fuel ambition backsliding

Baku, 20 November (Argus) — The EU has warned parties at the UN Cop 29 climate summit in Baku, Azerbaijan, against going back on pledges made last year in Dubai to transition away from fossil fuels. Language on transitioning away from all fossil fuels was included in the outcome of Cop 28 in Dubai last year in a historic first, with almost 200 countries including major fossil fuel producers agreeing to the text. And the EU is pushing for the same commitment to be included in this year's outcomes. "No one should pretend that the previous Cop didn't happen," European commissioner for energy Wopke Hoekstra said today. "There is the clear expectation that once you've signed up to do something, you actually do it," he said, adding that "the last Cop was very specific about transitioning away from fossil fuels". The EU views the declaration of G20 leaders, released on Tuesday morning, as an endorsement "in its entirety" of the outcomes of Cop 28, Hoekstra said. Further enhancing mitigation — reducing emissions — policies will be a "crystal clear element" that the bloc will focus on in the coming days, he said. Failing to include language on transitioning away from fossil fuels would mean last year's Cop should be considered a failure, according to Lidia Pereira, head of the European parliament delegation in Baku. But she trusts delegates from the UAE to be strong advocates for the wording on transitioning away from fossil fuels, she said. The UAE is part of the Arab States negotiating group, which also includes Saudi Arabia, Egypt, Iraq and Libya. Work on a mitigation outcome was rescued from the brink of collapse at the start of last week but is progressing slowly. As of last night negotiators did not have a draft text on mitigation, but must deliver one to the Cop presidency for publication around midnight. If parties fail to come to a conclusion in mitigation talks, the text for a new finance goal may become the main space in which fossil fuel language could land. Its most recent draft, released on 16 November, includes references to transitioning away from fossil fuels. Negotiations on climate financing — the so-called new collective quantified goal (NCQG) — to help developing countries adapt to and address climate change are central to this year's Cop. Thorny issues have included the amount of financing, which countries should contribute, the form that the financing will take and the broadening of the contributor base. The next draft is scheduled to released around midnight on Wednesday, after negotiators have spent days working to bring parties' initial positions closer together. Hoekstra refused to be drawn on reports, raised by Bolivia's representative , that the EU is eyeing a number of $200bn/yr for the NCQG, well below the expectations of likely recipient countries. The EU prefers to focus on other elements, including progress on Article 6 and mitigation, before having a "meaningful conversation about the exact amount", Hoekstra said. Talks on finalising the details of an international carbon market under the Article 6 of the Paris Agreement continue to inch forward at Cop 29, but with key sticking points yet to be resolved. By Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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