PdV restarts limited oil blending

Venezuela's state-owned PdV and its partners resumed partial crude blending at the Jose terminal after PdV temporarily cleared sanctions-related export bottlenecks, the latest turn in the company's on-again off-again operations.

PetroPiar, PdV's joint venture with Chevron, and PetroSinovensa, PdV's joint venture with China's state-owned CNPC, both restarted blending extra-heavy Orinoco crude with domestic light grades to produce heavy sour Merey for export.

The operations resumed after PdV moved out more than 4mn bl of accumulated crude at the Jose complex in eastern Venezuela to its 940,000 b/d CRP refining complex in western Venezuela and to Cuba.

PdV is seeking to free up about 7mn-8mn bl of storage in its eastern division and simultaneously help to alleviate an acute oil shortage in Cuba, Venezuela's close political ally.

PdV's exports have been constrained by US sanctions that have driven away most traditional buyers, although some such as India's Reliance and Spain's Repsol are still refining Venezuelan crude.

Since the end of September, PdV has shipped about 3mn bl of 16°API Merey blend, diluted crude (DCO) and unprocessed crude and products from the CRP's Amuay and Cardon anchorages in Falcon state. Most of the shipments sent to Cuba between 29 September and 10 October were cabotaged from the Jose anchorage to the CRP before departing for Cuba. Buyers note that much of the overflow supply has excess water.

Up to 4mn bl more could be shipped to Cuba over the coming four to six weeks, two oil union officials at the Jose complex said.

PdV and oil union officials say that some of the oil shipped to Cuba will likely be resold.

The bottlenecks have reverberated upstream. Venezuela produced around 650,000 b/d in September, down by an estimated 100,000 from August.

Lack of tanker capacity to load cargoes at the Jose terminal, which accounts for up to 75pc of PdV's total export shipments, maxed out Venezuela's operational mainland and floating storage capacity at nearly 38mn bl at the end of September, according to oil ministry and PdV eastern division upstream officials.

On paper PdV has about 60mn bl of storage capacity nationally, but at least a third of the storage assets are out of service, the oil ministry official said. Over a decade of poor maintenance, accidents, fires and explosions at PdV terminals, refineries and tank farms have "severely degraded" PdV's storage assets, the ministry official added.

The loss of leased storage in Dutch Caribbean islands has aggravated the logistical challenge.

PetroSinovensa and PetroPiar had been producing around a combined 200,000 b/d of Merey before the export backlog forced the plants to shut down in recent weeks.

PetroSinovensa was producing about 72,000 b/d of Merey before its 30 September shutdown. It is unclear how much blend PetroSinovensa is producing since restarting operations this week, but an oil union official at Jose estimates output at about 40,000 b/d.

PetroPiar had been producing about 130,000 b/d of Merey in July and hoped to reach 170,000 b/d by the end of August. But blend output dropped below 100,000 b/d immediately before it suspended operations in mid-September.

Oil ministry and PdV officials blame US sanctions for the bottlenecks that have forced the company to reduce crude output at numerous fields in Venezuela since early August, including Lagunillas, Bachaquero, Tia Juana and Boscan in Zulia state.

Escalated US sanctions announced on 5 August have discouraged many tanker operators from continuing to do business with PdV during the past nine weeks, causing a significant drop in bookings.

The export constraints has been compounded by personnel problems in PdV's marketing and trading departments. PdV's marketing and trading offices in Caracas are now managed largely by inexperienced personnel who formerly worked in government housing programs under National Guard general Manuel Quevedo before he was named oil minister and PdV chief executive in November 2017.

"The people Quevedo imported into all areas of PdV from the housing programs are loyal to him but do not know anything about chartering tankers and trading oil," an oil union official said.