PdV-CNPC JV Managers Arrested

(Argus, 7.Oct.2019) — Senior managers of Venezuelan state-owned PdV’s heavy crude-blending joint venture with Chinese state-owned CNPC were arrested late last week, days after the blending plant halted operations.

PetroSinovensa had stood out as the most resilient of PdV’s crude joint ventures at the Jose industrial complex, maintaining partial operations in the face of extensive power outages and sanctions-driven storage constraints in recent months.

According to an internal PdV security report seen by Argus, military counterintelligence (DGCIM) agents arrested PetroSinovensa president Alberto Bockh, three managers and a former manager on charges of corruption. The arrests include general services manager Domingo Raga, finance manager Leon Gonzales, and former security manager Alejandro Armas. Contracting manager Yurialbert Garcia is still at large, according to the report. It is not clear if she has since been apprehended.

PetroSinovensa was producing about 72,000 b/d of 16°API Merey crude blend in September, short of its 110,000 b/d capacity, before PdV shut down the facility on 1 October. The plant blends extra-heavy Orinoco crude with light domestic grades such as Mesa and Santa Barbara to produce the export grade Merey favored by Chinese refiners.

“Crude blending had to be suspended because we have nowhere to store the Merey and no tankers to ship it to China,” a PetroSinovensa official told Argus after PdV suspended operations pending effective solutions for its storage and tanker bottlenecks.

A month before the shutdown, a project to expand the plant’s capacity to 165,000 b/d was also stopped, because of non-payment of $52mn to CNPC construction subsidiary HuanQiu Contracting and Engineering. HuanQiu’s decision to halt the expansion work triggered the corruption probe, a Venezuelan oil ministry official said.

CNPC is a minority partner in PetroSinovensa, but the company has gained a greater operational role in recent years to compensate for PdV’s multitude of shortcomings, including a lack of cash and credit, equipment theft and labor flight. But management of the joint venture was still appointed by PdV chief executive and oil minister Manuel Quevedo and his close advisers.

CNPC had been a major lifter of Venezuelan crude until August, when it started to cancel or reprogram cargoes. But Chinese customs data shows that Venezuelan crude is still entering China, apparently through third parties which likely include Russian state-controlled Rosneft, the largest remaining lifter. US refiners and non-US companies with a strong US presence, such as India’s Reliance, were forced to stop buying Venezuelan crude as a result of US oil sanctions imposed in late January 2019. CNPC and Rosneft picked up most of the barrels that could no longer go to the US. In response to tightening US sanctions, an export backlog and a lack of available storage have forced PdV to shut in production upstream, with the average approaching 500,000 b/d, compared with an average of 650,000 b/d in September, according to Argus estimates based on consultations with PdV officials.

China’s imports of Venezuelan crude go mostly toward servicing billions of dollars in oil-backed credit that Beijing extended to Caracas since around 2007. Similarly, Rosneft takes Venezuelan crude in exchange for oil-backed debt from PdV.

CNPC and local Chinese diplomats could not be reached for comment on the PetroSinovensa arrests, which took place at the end of the Golden Week holiday in China.

PdV headquarters in Caracas also declined to comment.


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