Crude Summit: Venezuela oil unlikely to compete

Colombian and Brazilian crudes are unlikely to face competition from rising Venezuelan crude volumes in international markets, even if US sanctions continue to ease, according to key Latin American producers.

In Asia-Pacific — a top destination for crude from all three countries — independent refiners are facing a shortfall of Venezuelan heavy sour crude following Venezuelan state-owned PdV's blanket order to suspend all contracts. Chinese demand for March and April has already picked up for Colombia's heavy sour Castilla Blend, an ample and high quality substitute, Ecopetrol vice president Pedro Manrique said today at the Argus Americas Crude Summit in Houston, Texas.

Another demand center for heavy sour grades is Europe, where Spain's Repsol and Italy's Eni restarted a crude-for-debt deal with PdV in December.

But in both regions, Colombian grades are unlikely to see significant challenges from Venezuelan grades because of the decades-long neglect to infrastructure in Venezuela and unstable quality of the crude, according to Manrique.

"Those [Venezuelan] barrels are going to be limited because of the infrastructure that is in place today and the condition," Manrique said. "We don't expect that the quality is going to be stable quality. There's going to be a lot of volatility quality-wise."

State-owned Ecopetrol has crude production in over 350 Colombian onshore fields and operates a large crude pipeline system. In order to stabilize the quality of its flagship heavy sour Castilla crude, it brings components to blend with the grade and the blended proportion is consistent for every cargo that is exported, Manrique said.

Brazilian grades meanwhile, which are mostly light-to-medium sweet, are not similar in quality to Venezuela's heavy sour crudes, leaving ample appetite for sweets in Asia-Pacific and Europe, said Petrobras' executive manager of global trading Alipio Ferreira.

"Our sweet crude is very well accepted in Europe and Asia and we expect Asia to more demanding." Ferreira said.

Even if Venezuela can rebuild the oil industry's infrastructure, it will need to recruit new talent into the oil sector and that will take time.

"It might help if they allow some of the majors to go back and work with them so that they can start to bring in people to the country," Manrique said.

By Giovann Rosales