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Maduro foes press White House to save Citgo: Update

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

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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24/11/08

Argentina’s YPF sees jump in shale oil output

Argentina’s YPF sees jump in shale oil output

Montevideo, 8 November (Argus) — Argentina's state-owned YPF saw output of unconventional crude surge by 36pc to 126,000 b/d in the third quarter of the year compared to a year earlier. YPF's third quarter statement put total production at 559,000 b/d of oil equivalent (boe/d) with crude at 256,000 b/d, up by 8pc, and natural gas at 40.3mn m³/d, or 253,000 boe/d, an increase of 7pc, and 49,000 boe/d of natural gas liquids, up by 4pc. Unconventional crude accounted for 49pc of overall output. It was 39pc of total production a year earlier. YPF is the major player in Vaca Muerta, Argentina's unconventional formation that holds an estimated 16bn bl of crude and 308 trillion cf of gas, according to the US Energy Information Administration. The formation is at the heart of YPF's plans for Argentina to produce 1mn bl of crude and export up to 30mn metric tonnes/yr of LNG by the end of the decade. YPF is now Argentina's largest crude exporter, dispatching an average of 40,000 b/d in the third quarter, nearly all of this going by pipeline to neighboring Chile, according to Federico Barroetavena, chief financial officer. He said the company invested $1.35bn in the third quarter, with more than 70pc on upstream. It drilled 50 wells in the third quarter. YPF is moving ahead with its southern Vaca Muerta oil pipeline as it looks for partners for the full project. It has completed 50pc of the first 130km (81.4mi) segment. The second 440km, as well as storage tanks and a monobuoy platform, will require $2.5bn. The company anticipates construction to start in the first quarter of 2025. The initial capacity will be 180,000 b/d in 2026, increasing to 500,000 b/d in 2027 and, eventually, to 700,000 b/d. YPF is also the largest shareholder, with 37pc, in the Oldelval pipeline from Vaca Muerta to the coast. It is undergoing an expansion to 530,000 b/d in 2025. The state-owned energy company, Enarsa, completed in October the reversal of the country's northern gas pipeline to move Vaca Muerta gas to the north of the country. It will move more than 15mn m³/d of gas to northern Argentina. It previously moved gas from northern gas fields, now depleted, and Bolivia, to the capital, Buenos Aires. By Lucien Chauvin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Fund woes to hit Australian post-winter bitumen imports


24/11/08
24/11/08

Fund woes to hit Australian post-winter bitumen imports

Singapore, 8 November (Argus) — Australia's bitumen import demand following its June-August winter is anticipated to fall by about 20pc on the year because of prolonged funding issues and a lack of big paving projects, market participants told Argus . Australia continues to be plagued by budget and funding issues, with the country still reeling from the effects of the Covid-19 pandemic. Less funding has been allocated to road maintenance works this year and most of the local councils have decided to spend their budgets on other key sectors such as healthcare. Funding levels have overall been on a downtrend since 2020, market participants added. Although demand has risen since mid-October compared to the previous months this year, consumption levels remain unchanged from the same period in the last year as most projects are small and revolve around filling potholes, market participants said. Bitumen consumption is expected to be around 10-20pc lower on the year in 2024, the participants added, with some noting that the situation is unlikely to improve for at least two more years because of higher inflationary pressures in the country. Most importers in Australia currently have enough inventory to last until January 2025 and are not looking to procure spot cargoes on top of their term import commitments, and small volumes can be procured from the local suppliers if required, they said. Roads in Australia are set to get a maintenance boost, especially in parts such as southern Australia, according to the minister for regional development, local government and territories, but market participants argued that what "road projects" encompass has changed over the years and now includes other elements of maintenance such as grass cutting, construction of safety barriers and traffic lights, which do not involve road paving or bitumen. Of the entire budget allocated by the government, only around a third or less goes to road maintenance and paving works, Australia-based importers said. There was also a dip in demand from western Australia as authorities delayed pricing contracts for paving projects because of budgeting constraints. Australia imported around 488,874t of bitumen from January-August, according to Australian Petroleum Statistics data, compared to 605,283t from January-August 2023. Bitumen imports totalled around 932,286t in the whole of 2023, up from 915,467t in 2022. New Zealand demand to rise Conversely, New Zealand's import demand is expected to rise on the back of firm domestic consumption. Market participants in New Zealand said post-winter consumption and sales could be 3-4pc higher than the same time in 2023, which was already a record year for some importers. Importers noted the country is well on track to bringing in about 160,000-170,000t of bitumen this year. The weather has also been dry, making it conducive for road construction works. With the clear weather expected to carry on into summer, which falls between December and February, market participants said they are using this year-end period to stock up on inventory levels before the Christmas break in December. Most companies are likely to see a slowdown in road works by mid-December as contractors will leave for year-end breaks. It is important to buy enough supplies for the new year, said market participants, as February and March are usually the peak paving months for New Zealand. New Zealand imported about 54,000t in the first half of this year, compared to 144,220t during the same period last year, according to GTT data. The region imported 180,576t last year, compared to 200,615t in 2022. By Chloe Choo Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Hungary’s Mol cuts forecast for 2024 refinery runs


24/11/08
24/11/08

Hungary’s Mol cuts forecast for 2024 refinery runs

Budapest, 8 November (Argus) — Hungarian integrated oil firm Mol has revised down its 2024 forecast for crude runs at its two landlocked refineries after a "turnaround-heavy" third quarter, it said today. The company expects to refine around 11.5mn t of crude combined at the 161,000 b/d Szazhalombatta plant in Hungary and the 115,000 b/d Bratislava complex in Slovakia this year, down from its previous guidance of about 12mn t. The two refineries processed 8.25mn t of crude in January-September, down from 9.09mn t a year earlier. Their combined crude throughput was down by 11pc on the year at 2.81mn t in the third quarter. Mol carried out scheduled maintenance at Szazhalombatta between 26 July and 19 September and expects to complete maintenance work on petrochemical units at Bratislava in the first half of November. Crude intake at Mol's third refinery, the 90,000 b/d Rijeka plant on Croatia's Adriatic coast, rose by 2.6pc on the year to 802,000t in the third quarter and was largely unchanged year-on-year at 1.26mn t in January-September. The company's crude throughput forecast only includes the Hungarian and Slovakian refineries. Mol cut the share of imported crude in its overall slate to 3.35mn t, or 93pc, in the third quarter from 3.8mn t, or 97pc, a year earlier, while it almost doubled intake from its own crude production to 255,000t in July-September from 129,000t in the same period last year. Szazhalombatta and Bratislava mostly process Russian crude received through the Druzhba pipeline system under an EU oil ban waiver, while Rijeka mainly takes non-Russian seaborne crude. The profitability of Mol's refining business was hit by a 71pc year-on-year fall in its refinery margin indicator — calculated based on the Dated Brent crude benchmark — to just $3.70/bl in July-September. Its oil product sales fell by 4.2pc from a year earlier to 4.88mn t in the third quarter. This included 1.52mn t of products Mol had to buy from third parties to complement its own output and satisfy demand, a significant rise from 1.25mn t of third-party oil products it sold a year earlier. The firm's upstream oil and gas production rose by 11pc on the year to 96,100 b/d of oil equivalent (boe/d) in the July-September quarter. It has raised its full-year forecast to about 92,000-94,000 boe/d from previous guidance of around 90,000 boe/d. Mol's profit fell to 111.5bn forint ($295mn) in the third quarter from Ft175.8bn a year earlier. By Béla Fincziczki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US extends oil service firms' Venezuela waiver


24/11/07
24/11/07

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


24/11/06
24/11/06

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.

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