Foreign Oil And Gas Firms Look To Play Crucial Role In Venezuela

(Energy Global, David Bizley, 19.Oct.2018) — The majority of foreign companies are not making any profit or losing money in their partnerships with PDVSA to develop and produce hydrocarbons due to inadequate investment, shattered infrastructure and US sanctions.

However, in the long term, having access to the vast hydrocarbon reserves of Venezuela compensates the current country risks and current negative cash flows in joint ventures (JVs), says GlobalData.

In this way, foreign companies have formally or informally also gained operatorship in key upstream fields located mainly in the Orinoco Belt. Indeed, Rosneft gained operatorship in the Mejillones and Patao blocks and exporting rights for 30 years with an in-kind 20% royalty rate.

Chinese and Russian companies have invested the most in the Venezuelan oil and gas sector during recent years. China, through its Development Bank, has provided more than US$60 billion in loans to Venezuela. In 2018, it has given an additional US$5 billion loan to support oil developments in the country, on top of the US$6.3 billion in loans since 2014 from Rosneft.

David Bautista, Oil and Gas Analyst at GlobalData, comments: “In other important basins such as Maracaibo or East Venezuela, most companies have recovered their initial investments. Thus foreign participants will likely be able to improve their JV terms and conditions in exchange for capital injection in the sector if the critical situation ends when PDVSA is finally able to boost production.”

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Trump Talks Tough On Venezuela, But Imports Ever More Venezuelan Oil

(Miami Herald, Andres Oppenheimer, 17.Oct.2018) — There is a major inconsistency in President Trump’s stand on Venezuela: He talks tough — and even makes veiled threats of a military intervention in that country. But at the same time, he steadfastly refuses to cut U.S. imports of Venezuelan oil, which are the main source of income of Venezuela’s dictatorship.

In fact, the United States has been increasing purchases of Venezuelan oil recently. While U.S. oil imports from Venezuela had decreased in recent years, they have been rising since February and increased by 28 percent in September, according to the Refinitiv Eikon data firm.

What the United States buys accounts for up to 80 percent of Venezuela’s oil income. If the Trump administration drastically cut its oil imports, President Nicolas Maduro’s dictatorship —which already faces a 1 million percent annual inflation rate and widespread food and medicine shortages —would have a hard time surviving, some critics of the Maduro regime say.

So why doesn’t Trump reduce Venezuelan oil imports?

First, because U.S. refiners in the Gulf Coast oppose it, saying that it would drive up domestic gas prices and affect pro-Trump constituencies in Louisiana, Texas, Alabama and Mississippi. Trump would lose more votes in those states than he would gain among Venezuelan Americans in Florida, some advisers are telling him.

Second, Trump’s National Security Adviser John Bolton and Secretary of State Mike Pompeo are focused on crippling Iran’s oil exports. Many in the White House think that causing a simultaneous collapse of both Iranian and Venezuelan oil exports would drive up world oil prices and hurt U.S. consumers, oil experts say.

Third, and perhaps most interesting, while Trump likes to talk tough on Venezuela to gain votes in Florida, he may fear producing a worse humanitarian crisis that would almost commit him to a military intervention there.

“If you break it, you buy it,” George David Banks, a former international energy and environment adviser to Trump, told the S&P Global Platts website. “The White House doesn’t want to own this crisis.”

Trump has stepped up Obama administration’s individual sanctions against top officials of the Maduro regime, and imposed sanctions on purchases of Venezuela’s debt. But “the Trump administration is more hesitant than ever” to impose oil sanctions, says the Platts report.

Supporters of reducing U.S. imports of Venezuelan oil reject the idea that such a move would aggravate the country’s humanitarian crisis without necessarily bringing down the Maduro regime. Accelerating the country’s collapse to force a regime change is the best option available, they argue.

And a cutback of Venezuelan oil imports would not necessarily give Maduro a propaganda victory by allowing him to play the victim of U.S. “imperialism.” Trump could simply reduce Venezuelan oil purchases, without declaring an oil embargo or saying a word about it, they say.

But perhaps the strongest argument for a gradual U.S. cutback of oil purchases is that it would lead other countries to take the Trump administration seriously when it asks for international sanctions against Venezuela.

Many foreign officials ask: How can the Trump administration ask others to impose economic sanctions when the United States is Venezuela’s biggest trading partner, in effect, bankrolling the Maduro regime?

When I asked Argentina’s President Mauricio Macri in an interview last year what the international community should do to help restore democracy in Venezuela, he responded that the first step should be taken by the United States.

“If the United States really took a measure such as suspending oil purchases from Venezuela, the Maduro regime would have a serious financing problem,” Macri told me. He added that by cutting Venezuelan oil imports, “The United States could change things (in Venezuela) definitively.”

I’m not sure that drastically cutting U.S. oil purchases from Venezuela would be the best idea; it likely would come at a huge humanitarian cost. But this much is clear: If Trump wants other countries to step up sanctions against Venezuela, he, himself, should consider a gradual slowdown in U.S. purchases of Venezuelan oil, instead of sending more cash to the Maduro regime.

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U.S. Eyes More Venezuelan Sanctions, But Oil On Backburner: U.S. Official

(Reuters, Roberta Rampton, 17.Oct.2018) — The United States plans to turn up sanctions pressure on Venezuela but sees less need to immediately target its energy sector, given sagging production from the OPEC member’s state-run oil company, a senior U.S. administration official said on Wednesday.

The U.S. government has imposed several rounds of sanctions on Venezuelan military and political figures close to socialist President Nicolas Maduro, who it blames for trampling on human rights and triggering the country’s economic collapse.

Earlier this year, the Trump administration had weighed escalating sanctions by targeting a Venezuelan military-run oil services company or restricting insurance coverage for oil shipments.

The actions would have built upon last year’s ban for U.S. banks from any new debt deals with Venezuelan authorities or state-run oil giant PDVSA.

Asked by reporters whether the U.S. government had slowed down on its push for sectoral sanctions, the senior official described them as some of the many “tools” it is keeping in reserve. “With regards to Venezuela, all options are on the table,” said the official, who spoke on condition of anonymity.

“The fact is that the greatest sanction on Venezuelan oil and oil production is called Nicolas Maduro, and PDVSA’s inefficiencies,” the official said.

Venezuela’s crude oil production hit a 28-year low in 2017, a slump blamed on poor management and corruption.

“At the end of the day, Nicolas Maduro has taken care of really running PDVSA to the ground, and essentially more and more making it a non-factor,” he said.

Almost 2 million Venezuelans have fled since 2015, driven out by food and medicine shortages, hyperinflation, and violent crime. The exodus has overwhelmed neighboring countries.

Maduro, who denies limiting political freedoms, has said he is the victim of an “economic war” led by U.S.-backed adversaries.

The Trump administration also plans to ramp up economic pressure on Cuba’s military and intelligence services, the official said.

In his speech last month to the United Nations, President Donald Trump linked Venezuela’s crises to “its Cuban sponsors.”

“That is a message that we will continue to put out, but frankly its a message that the region needs to talk about,” the official said, noting John Bolton, Trump’s national security adviser, is expected to elaborate on the issue publicly soon.

“The issue of Cuban involvement in Venezuela is a fact. It’s not a theory, it’s not a story,” the official said.

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PDVSA, Pequiven Retirees Protest Lack Of Pension Payments

(Energy Analytics Institute, Piero Stewart, 17.Oct.2018) — Retired workers with PDVSA and Pequiven spoke out in the streets in a protest aimed at calling attention to pensions unpaid by the Venezuelan government.

Unfortunately, a number of retired company workers have died waiting for pension payments, reported Venezuelan media El Carabobeño, citing José Castillo, director of the Association of Retirees and Pensioners at PDVSA and Pequiven.

In the past four years we have tried and done everything to get PDVSA to pay the pensions, but to-date these efforts have been in vain, said Castillo.

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PDVSA Preparing $950 Million Payment On 2020 Bond: Sources

(Reuters, 15.Oct.2018) — Venezuela’s state-owned oil company PDVSA is preparing to pay holders of its 2020 bond some $950 million this month, after failing to make interest payments on most other bonds this year, sources at the company and in the local financial sector said.

PDVSA has fallen behind on more than $7 billion in principal and interest payments since the end of 2017, according to market sources and Refinitiv data, as an economic crisis in Venezuela has worsened.

But cash-strapped PDVSA has stayed current on the 2020 issue, which is backed by 50.1 percent of shares in U.S. refining network Citgo.

“Quevedo gave his approval to arrange this payment,” said one person at PDVSA familiar with the plans, referring to Manuel Quevedo, Venezuela’s oil minister who is also president of PDVSA. “It will be paid in full.”

Another source at PDVSA and three sources in Venezuela’s financial industry confirmed that the company plans to pay. The sources spoke last week and requested anonymity because they were not authorized to speak publicly.

Neither PDVSA nor Venezuela’s oil ministry immediately responded to requests for comment.

PDVSA must pay $840 million by Oct. 27 to cover an amortization payment on the bond, and then has 30 more days to make a $107 million interest payment.

“PDVSA has been making payments on the 2020 bond and they tell us they plan to keep doing so,” said one local financial operator who has spoken with the company about the plans.

To be sure, this year PDVSA has made payments only on its 2020 and 2022 bonds, prompting ratings agencies to declare the company and Venezuela’s government in selective default. The drop in crude prices that began in 2014 and an ensuing decline in production have reduced the OPEC nation’s government revenue.

Investors believe PDVSA will prioritize the 2020 bond because of the potential implications for Citgo. The remaining shares in the refiner are already pledged to Russia’s Rosneft as collateral on a $1.5 billion loan.

And it is also under threat from Canadian miner Crystallex, which has won a judge’s authorization to seize Citgo shares to collect on a $1.4 billion award stemming from a decade-long nationalization dispute.

“PDVSA has demonstrated via its legal efforts a strong preference to maintain ownership of Citgo,” JP Morgan wrote in a note to clients last week.

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Venezuela Solicits Audit of Pacific Coast Refinery, Río Napo

(Energy Analytics Institute, Piero Stewart, 13.Oct.2018) — Venezuela has solicited an audit of costs related to the Pacific Coast Refinery and Río Napo JV in order to discuss potential investment plans with Ecuador, reported the daily Ecuadorian newspaper El Universo.

In May 2018, Saudi Arabia’s Aramco announced it was interested in participating in construction of the refinery. At least three consortium have announced interest in the refinery, reported El Universo.

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Energy Analytics Institute (EAI): #LatAmNRG

Shell Seeks To Sell Venezuela JV Stake

(Reuters, 12.Oct.2018) — Royal Dutch Shell Plc is negotiating the sale of its stake in a Venezuelan oil joint venture to Paris-based Maurel & Prom , three sources said this week, a move to scale down its crude business in the ailing OPEC-member country to focus on gas. The Anglo-Dutch company is seeking to sell its 40 percent stake in Petroregional del Lago, a joint venture with Venezuela’s state-run oil company PDVSA in the western state of Zulia near Colombia.

The area has been plagued by frequent theft of equipment and near-daily power cuts as Venezuela remains mired in deep recession, hyperinflation and chronic shortages of food and medicine. Foreign companies also have complained in private that joint ventures with PDVSA are stymied by convoluted bureaucracy, dodgy contracts, and lack of resources, according to dozens of sources in the industry.

At Petroregional, Shell has grown frustrated by delays in receiving dividends from PDVSA and a ban on minority partners independently exporting production, one of the sources said. That has deprived Petroregional, which in 2016 produced about 33,000 barrels per day (bpd) of crude, of much-needed income and dented profitability, the source added. In the last few weeks a disagreement with Venezuela has emerged over a fee called an entrance bonus that Maurel & Prom would have to pay to the government, as required by Venezuelan law, to gain access to the field’s reserves, two of the sources said. Negotiations are currently on hold, they added.

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Maurel & Prom Confirms Discussions With Shell Over Urdaneta West Field In Venezuela

(Maurel & Prom, 12.Oct.2018) — Etablissements Maurel & Prom notes recent press articles and confirms it is working on the acquisition of Shell Exploration and Production Investments B.V.’s 40% interest as “Shareholder B” in Petroregional del Lago Mixed Company, which operates the Urdaneta West field in Lake Maracaibo, Venezuela.

Maurel & Prom Venezuela, subsidiary of Maurel & Prom, has signed a Share Sale and Purchase Agreement (the “SSPA”) with Shell. Under the SSPA terms, the consideration for the acquisition of Shell’s shares in the mixed company is c.€70 million, funded from Maurel & Prom’s existing cash resources.

Petróleos de Venezuela S.A. (PDVSA), wholly owned subsidiaries Corporación Venezolana del Petróleo (CVP) and PDVSA Social (PDVSAS) collectively referred to as “Shareholder A”, jointly own the remaining 60% stake of the mixed company.

The field is currently producing around 16,000 barrels of oil per day on a 100% basis (6,400 barrels of oil per day net to Shareholder B’s 40% interest). The asset offers significant optionality through the development of additional reserves, and the possible extension of the licence duration beyond 2026 (the current licence limit).

The closing of this acquisition remains subject to a number of conditions, amongst others the obtaining of the required governmental approvals, and the finalisation of the negotiations with PDVSA and its subsidiaries (CVP and PDVSAS) on the implementation and the funding of a redevelopment plan to increase the production of the Field, which should be partly funded by operating cash flow, and partly with Maurel & Prom Venezuela’s funds up to an amount of c.€350 million over the period 2018-2023. Maurel & Prom Venezuela’s commitment to provide the project funding is subject to the fulfilment of several conditions, including the progressive reimbursement to Maurel & Prom Venezuela of the portions of project funding attributable to Shareholder A.

Maurel & Prom takes all the necessary steps and actively works on meeting all condition precedents in order to close the acquisition. A further announcement will be made in due course.

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Energy Analytics Institute (EAI): #LatAmNRG

Venezuela Sets New Wages For Oil Workers As Protests Simmer

(Reuters, Alexandra Ulmer, 10.Oct.2018) — Venezuela on Wednesday increased wages for workers at state energy company PDVSA after employees staged small protests to decry meager salaries amid the OPEC nation’s economic meltdown.

Socialist President Nicolas Maduro in August unexpectedly ordered a 60-fold increase in the minimum wage to compensate for around 500,000 percent annual inflation and a 96 percent devaluation of the bolivar currency.

But workers at PDVSA said their wages had not been bumped up accordingly, and that the cash-starved company had instead been paying one-off bonuses.

Vice-President Delcy Rodriguez, flanked by pro-government union leaders, on Wednesday announced new wages but did not provide specific figures, instead praising PDVSA’s attitude in the face of U.S. sanctions.

“To the PDVSA workers, our gratitude, because they have been a fundamental pillar in the defense of the oil industry against attacks from imperialist centers of power,” said Rodriguez, a key Maduro ally.

A PDVSA worker and two former employees said the new wages remained inadequate and would not halt a brain drain that has the company desperate for engineers and chemists just as its production sinks to its lowest in decades.

According to an unofficial summary of the new salaries circulated by PDVSA workers, the lowest monthly salary is now 1,800 bolivars – the official minimum wage – or just $13.70 a month. The highest salary, for executives, was put at 6,400 bolivars, a whisker above $49 a month.

PDVSA did not respond to a request for information about the salaries.

Thousands of oil workers are fleeing the state-run firm under the watch of its new military management, which has quickly alienated the firm’s embattled upper echelon and its rank-and-file, sources have told Reuters.

Those who remain are increasingly unmotivated, irate over low wages, and fearful of work accidents as PDVSA’s installations deteriorate due to years of underinvestment and mismanagement.

“There is a lot of anger, and at the same time motivation, because workers have woken up and are not putting up with this anymore,” one refinery worker said this week.

Still, fears of dismissal and heavy military presence at PDVSA have kept protests in check in Venezuela, home to the world’s biggest crude reserves.

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Energy Analytics Institute (EAI): #LatAmNRG

Citgo, Valero Drive Up U.S. Purchases of Venezuelan Oil in September

(Reuters, Marianna Parraga, 4.Oct.2018) — Venezuela’s September crude sales to the United States rose to their highest in over a year, boosted by purchases by Citgo Petroleum, the U.S. refining arm of Venezuela’s state-run PDVSA, and Valero Energy, according to Refinitiv Eikon trade flows data.

A collision in August at a dock of Venezuela’s main oil port of Jose has limited exports in large vessels to Asia, spurring loading of more medium-size tankers including those typically covering routes to the United States.

Venezuela’s overall crude exports fell 14 percent in September to 1.105 million bpd due to declining oil output and dock woes at Jose terminal. The OPEC-member country’s crude production fell for third time in a row to 1.448 million bpd in August, according to official figures.

The United States imported 601,505 barrels per day (bpd) of Venezuelan crude last month, a 28-percent increase versus August and the highest monthly average since August 2017, according to the Refinitiv Eikon data.

Valero and Citgo bought over 250,000 bpd each of Venezuelan crude last month compared with an average of 170,000 bpd earlier this year, according to the data.

A total of 38 cargoes were purchased by U.S. customers from PDVSA and its joint ventures in September. At least three of those shipments were co-loaded in different Venezuelan ports to avoid problems at Jose, where repairs are expected to take at least one more month to be completed.

PDVSA’s exports last month included more light and medium crudes, generally produced at very low levels in Venezuela and leaving less of these grades for PDVSA’s domestic refineries to produce fuels.

In September, PDVSA sold Citgo and Valero some 84,000 bpd of Santa Barbara, Mesa and Leona crudes, which are typically processed at Venezuelan refineries.

PDVSA regularly imports gasoline, diesel, liquefied petroleum gas and refining feedstock to offset low production at its refineries.

(Reporting by Marianna Parraga; Editing by Cynthia Osterman)

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Venezuela’s Oil Exports Are Falling Even Faster Than Expected

(OilPrice.com, Irina Slav, 3.Oct.2018) — A delay in port repairs following a tanker collision is putting additional pressure on already pressured Venezuelan crude oil exports, Reuters quoted anonymous sources close to PDVSA as saying this week. It seems that Venezuela’s woes are only multiplying as time goes by, although news from official Caracas sources seems more upbeat. Oil, however, appears at the forefront of Venezuela’s plight.

A dock at Venezuela’s biggest oil port, Jose, was closed in late August after a tanker collided with it. At the time, Reuters reported that the repairs would delay the delivery of 5 million barrels of crude, destined for Rosneft, which, according to the news outlet, could put a strain on relations between the Russian company and PDVSA, which have a money-for-oil agreement. This is only the latest in PDVSA’s troubles with its oil exports.

Besides a steady decline in production, Venezuela’s state-run oil company earlier this year ran into problems with its storage capacity and export terminals in the Caribbean as U.S.-based ConocoPhillips took an aggressive approach to enforcing a court ruling that awarded it US$2 billion in compensation for the forced nationalization of two projects in Venezuela. The company this summer seized several of PDVSA’s assets on Caribbean islands, which made it difficult for the Venezuelan state company to meet its export obligations. Having few options, PDVSA eventually caved, settling with Conoco.

Dock repairs are further complicating matters. PDVSA is supposed to deliver to Rosneft some 4 million bpd of crude under the latest bilateral agreement signed this April. On top of that, it normally exports crude for U.S. Valero Energy and Chevron from the same dock, the South dock of the Jose port, which is responsible for processing processes as much as 70 percent of the country’s crude oil exports.

Not to anyone’s surprise, the delay in resuming shipments is largely a result of insufficient funds, partially thanks to U.S. sanctions, which have essentially closed nearly completely the door to foreign funding. China, not bound by these restrictions, recently agreed to a US$5-billion lifeline for the Venezuelan government and its oil industry, but these billions will take time to become available. Given the multitude of problems that PDVSA is having, it would be a tough job to allocate these funds so that there is enough for everything.

Caracas is still not giving up. Just this week the government announced the official launch of the petro on international markets in hopes of offsetting the effects of U.S. sanctions by using this oil-and gold-backed cryptocurrency. President Nicolas Maduro said at the launch that the petro would be legal tender for everything in Venezuela, including as a substitute for the dollar.

“All Venezuelans will have access to the Petro and through it to make international purchases,” Maduro said.

Venezuela also plans to boost its oil exports to China as part of plans to transform its economy and get back on its feet. To this end, it will work with Chinese oil companies to improve production. Maduro said in July that PDVSA would boost oil production by 1 million bpd from June levels by the end of the year, although he admitted that this goal would be difficult to achieve. Venezuela pumped 1.45 million bpd in August, and the year-to-date average stands at 1.544 million bpd. This is a far cry from the figure from five years ago, when its daily average was 2.9 million bpd. It’s a matter of a short time to see if the petro and Chinese money will be enough to reverse the decline in production and exports.

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Venezuelan Oil Port Repairs Delayed, Crude Exports Fall: Sources

(Reuters, Marianna Parraga, 2.Oct.2018) — Repairs to a dock at Venezuela’s main oil export port will take at least another month to complete following a tanker collision more than a month ago, further restraining the OPEC member nation’s crude exports, according to sources and shipping data.

A minor incident in late August forced state-run oil company PDVSA to shut the Jose port’s South dock, one of three used to ship heavy and upgraded oil to customers including Russia’s Rosneft and U.S.-based Chevron Corp, and to receive diluents needed for the exports.

Jose port typically handles about 70 percent of Venezuela’s total crude exports, which in September declined 14 percent compared with the previous month to 1.105 million barrels per day (bpd), according to Refinitiv Eikon data.

Oil exports are the financial backbone of Venezuela’s economy, which is struggling to overcome hyperinflation, a long-standing recession and scarcity of basic goods.

PDVSA had estimated the berth would reopen by the end of September, but needed parts have not been obtained as PDVSA continues facing problems to pay foreign providers due to financial sanctions imposed by the United States, sources close to its operations said.

PDVSA’s crews completed the removal of the damaged fences last week, but replacements have not arrived in the country.

“The fences were bought, but funds to pay the provider were retained due to the U.S. sanctions. A new deal to buy them through a third party will take at least another month,” one of the people familiar with the matter said.

PDVSA was not immediately available for comment.

U.S. President Donald Trump’s administration last year imposed financial sanctions on Venezuela and PDVSA, affecting their ability to make transfers in dollars and complete payments through the U.S. banking system.

PDVSA has neither resumed shipments from most of its Caribbean terminals, which remain frozen after U.S. producer ConocoPhillips’ legal actions earlier this year to satisfy a $2 billion arbitration award, according to the data.

Conoco and PDVSA in August struck a payment agreement, but the Venezuelan oil firm has yet to complete a $500 million installment due by the end of November to unlock its Caribbean operations.

Venezuela’s crude output fell again in August to 1.448 million bpd according to official figures, putting its annual average at 1.544 million bpd, the lowest in over six decades.

Economic measures recently announced by President Nicolas Maduro’s government, including a steep salary increase, have fallen short for Venezuela to regain access to sufficient foreign credit and reverse the downturn.

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Oil Workers Protest Pay in Venezuela

(Bloomberg, 1.Oct.2018) — Venezuelan oil workers protested against a new minimum wage at key crude processing facilities last week, claiming the new law disregards previous pay scales and union agreements.

Several dozen workers protested outside Petropiar, the oil upgrader controlled by Petroleos de Venezuela SA and Chevron Corp. in Anzoategui state Friday morning, chanting “Fair wages, now!,” according to videos and a workers’ bulletin seen by Bloomberg. Workers at Petrocedeno, another upgrader owned by PDVSA, Total SA and Equinor ASA, organized meetings last week to arrange a protest near the state prosecutor’s office in Puerto la Cruz on Oct. 3, according to Petrocedeno worker Leonardo Ugarte.

PDVSA employees are revolting against this month’s more than 3,000 percent increase in the nation’s minimum wage to 1,800 bolivars a month — about $15 at the black-market rate — which they claim is not enough to cover their needs. Venezuela’s inflation is running at about 111,000 percent, according to Bloomberg’s Cafe con Leche Index.

PDVSA’s human resources head Robert Perez traveled to Puerto La Cruz from Caracas to meet with workers and discuss details of the new wages, but most unions opted out of the meetings, Ugarte said.

Chevron deferred questions to Petropiar. Petrocedono JV partners Equinor and Total didn’t reply to requests for comment on Friday and Monday.

The protests have stalled procedures and work flow near the Orinoco Belt and Petropiar, according to a worker who asked to remain unnamed. They have also affected work at Petrocedeno, Venezuela’s largest upgrader, Ugarte said. Workers at a PDVSA fertilizer plant in Puerto La Cruz called Fertinitro also protested on Thursday, according to Gregorio Rodriguez, one of the city’s oil union leaders.

A PDVSA official confirmed Perez’s visit but declined to offer further details on whether Petropiar’s procedures had been stalled.

PDVSA workers from Puerto La Cruz oil docks marched in one of Puerto La Cruz’s main avenues carrying banners demanding better salary and respect for contracts, Rodriguez said.

“PDVSA’s management has not given us details of new salaries or how pay scales will be distributed,” Rodriguez said.

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India Eyes Rupee-Route, Barter for Venezuelan Crude

(The Hindu Business Line, Vishwanath Kulkarni, Richa Mishra, 30.Sep.2018) — India is considering setting up a rupee-payment mechanism for trade with Venezuela, besides exporting rice and drugs to the South American nation, all in return for crude oil.

The Ministries of Commerce, Finance and Petroleum are looking into the proposal.

“Venezuela is among the top 10 crude oil suppliers to India. Since the size of the business would run into several millions, it needs to have a proper trade balance. So, there could be the possibility of using the rupee-payment system as a trade off: Venezuela wants to sell oil, India has to look at what it can sell besides rice and pharmaceuticals, to make the mechanism more attractive,” an official said, adding that the arrangement “could work like a barter system”.

The rupee-payment mechanism is not a new concept, but there is a general agreement that the strategy for Venezuela cannot be similar to that for sanctions-hit Iran.

This mechanism is also being considered to benefit Indian exporters, particularly pharmaceutical products and non-basmati rice. “Rice is well-consumed in Venezuela and we see a huge potential, provided a proper payment mechanism is established,” said BV Krishna Rao, President of the Rice Exporters Association.

So far, the efforts of exporters to tap the Venezuelan market through the Dubai route have not been successful due to payment issues. Rao estimates that India could export up to half-a-million tonnes to Venezuela on a regular basis, if a rupee-based payment mechanism is set up.

Crude oil imports are of prime concern for India in its relations with both Venezuela and Iran. Sri Paravaikkarasu, Director – Asia, Oil at FGE, a global oil and gas consultancy, said: “In the previous round of sanctions (on Iran), India did use rupee payment and barter arrangements for its Iranian crude imports. India is no doubt considering these options to side-step the soon-to-be-imposed US sanctions against Iran. But we must remember that this US President is taking a hardline against Iran, compared to his predecessor.”

Private refiners have already decided not to import oil from Iran. “Even if the national oil companies consider other payment options with Iran and to some extent with Venezuela, they would only achieve limited success. The US intends to track tanker movements out of Iran and monitor the crude/condensate supply-chain down to recipient countries. So, energy firms with any sort of exposure to the US financial system will come under sanctions if they are caught circumventing the sanctions in any way,” she said, adding that Indian companies may well avoid creating the “high-risk scenario”.

As estimate by Vanda Insights, based on shipping information, said that India’s oil imports from Iran stood at 4.81 lakh barrels a day in September, about 4.17 lakh barrels August, and about 6.28 lakh barrels in July. In September 2017, about 3.52 lakh barrels a day came in.

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Venezuela to Continue in Defense of Oil Market Equilibrium

(Energy Analytics Institute, Piero Stewart, 29.Sep.2018) — Venezuela’s Oil Minister Manuel Quevedo announced the South American country would continue to seek equilibrium in the petroleum market.

“Under the leadership of President Nicolás Maduro, we will continue to defend a policy of equilibrium and stabilization in the world oil market, having as a fundamental basis a sustained cooperation with OPEC producing countries for the benefit of consumers, producers and investors,” reported PDVSA in an official statement, citing Quevedo.

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Uruguay Judge Orders ANCAP to Pay $5.6 Mln to Exor Internacional Ltda.

(Energy Analytics Institute, Ian Silverman, 28.Sep.2018) — Uruguayan Judge Carlos Aguirre ordered ANCAP to pay a fine of $5.6 million plus interest to Exor Internacional Ltda. as a result of a “patrimonial trial related to administrative responsibility,” reported the daily LaRed21.

The Exor payment relates to a debt maintained with Venezuela’s state oil company PDVSA, according to the daily.

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Oil Spill Reported at Venezuela’s Anzoátegui Petrochemical Complex

Source: Ultimas Noticias

(Energy Analytics Institute, Piero Stewart, 27.Sep.2018) — Venezuela’s José Antonio Anzoátegui Petrochemical Complex was the site of a crude oil spill that affected the beaches of the Peñalver municipality in Anzoátegui state.

The presence of oil was detected on September 26, 2018 along the beaches of Puerto Píritu, La Cerca and El Hatillo, located in the western region of the state, by fishermen and tourism promoters, reported the daily Venezuelan newspaper Ultimas Noticias.

“A few months ago fishermen recovered oil from their nets and not fish,” reported the daily citing Peñalver municipality tourism promoter Humberto Guerra. He added that at least five such occurrences have occurred in the region, without stating a specific time frame.

Venezuela’s Ministry for Ecosocialism (Minec) Director Katiuska Homsi announced contingency efforts to collect the detected oil involved 120 persons onshore and another 20 offshore, according to the daily.

Venezuela’s state oil PDVSA did not respond to emails requesting details about the oil spill or clean-up efforts.

***

 

Venezuela Faces Fresh Blow With Ship-Fuel Rules Threatening Exports

(Bloomberg, 27.Sep.2018) — New rules forcing ships to use cleaner marine fuels may deal yet another blow to cash-strapped Petroleos de Venezuela SA, an exporter of high-sulfur fuel oil.

From Jan. 1, 2020, vessels will have to switch to less-polluting bunker fuel or be fitted with equipment to curb emissions, under new International Maritime Organization rules. That’s expected to weaken demand for the high-sulfur residual fuel oil produced by PDVSA, pushing prices lower at the same time that the cost of importing clean fuels rises, said Mel Larson, a consultant at KBC Advanced Technologies Inc.

As refiners prepare to produce IMO-compliant fuels that rely on low-sulfur crude oils, sour crude produced by Venezuela and Mexico may be sold at deeper discounts. Meanwhile, demand for lighter distillates, including diesel, is expected to increase. That ultimately will take a toll on the economies of Venezuela, Mexico and Ecuador that rely on imported diesel and gasoline.

“IMO 2020 has the potential to hurt GDP growth in most Latin American economies, especially the ones that subsidize fuel prices,” Larson said by email. “As the cost of imported fuels rise, subsidizing gasoline and diesel will only serve to expand a country’s or company’s debt load.”

Most refiners in Latin America haven’t invested in units that can remove sulfur or crack residuals into more valuable molecules. That puts them at a disadvantage ahead of the rule, which is expected to slash global demand for high-sulfur bunker fuel to as low as 1 million barrels daily from 4 million barrels currently.

By this measure, Petroleos Mexicanos and PDVSA, respectively Latin America’s largest and second-largest exporters of fuel oil, are the ones who have most to lose.

Petroleo Brasileiro SA, on the other hand, is set to take advantage of the fuel shift, according to Guilherme Franca, executive manager of commercialization. Petrobras already exports IMO-compliant fuels and is exploring the re-opening of fuel oil storage tanks in Singapore to better supply bunker fuel markets in Asia.

***

PetroMonagas, PetroVictoria Rumored to Have Changed President

(Energy Analytics Institute, Ian Silverman, 26.Sep.2018) — The president of the two Venezuelan joint venture companies is rumored to have been changed, according to reports in the daily Noticias Venezuela.

The executive, Edgar Sifontes, is said to have left his position at the helms of both companies, reported the daily, citing Tweets from supposed workers at the companies.

Neither officials at PetroMonagas nor PetroVictoria returned calls seeking to confirm the reports.

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Venezuela’s Retrogressing Economy — Exhibit 1, PDVSA

(Steve Hanke, Contributor to Forbes, 19.Sep.2018) — Two hallmarks characterize capitalist economies. Firstly, property is predominately in private hands. Consequently, goods and services are allocated via market mechanisms in which prices provide signals for businesses, workers, and consumers. Secondly, capitalist economies are highly capitalized. Indeed, the stocks of physical and human capital are relatively large in relation to the capitalist economies’ income flows.

On those two counts, Venezuela is retrogressing. With Chavismo, which commenced when Hugo Chavez took power in 1999, Venezuela has beaten a hasty retreat from anything that would qualify as “capitalist.” Today, it is clearly in the throes of a socialist-interventionist system.

With the transition to a socialist system, capital consumption becomes pronounced. Socialism consumes capital (read: eats seed corn). It fails to accumulate productive capital. And, this is why socialist systems retrogress into states of poverty. After all, capital consumption means that too much is consumed in the present at the expense of the future.

In his 1945 book The Economics of Peace, my professor, the great Ken Boulding, first presented his simple, but powerful, “Bathtub Theorem.” It is actually nothing more than a simple truism. The rate of accumulation is equal to the rate of production, less the rate of consumption. As Boulding put it, “Production may be likened to the flow of water from a faucet, consumption to the flow down to the drain. The difference between these two flows is the rate at which the water in the bathtub—the total stockpile of all goods—is accumulating.”

War, of course, drains the economic bathtub, as capital is destroyed (read: consumed). A transition to socialism also results in capital consumption—a lower level of water in the capital stock bathtub.

In Venezuela, the most important part of the economy is the state-owned enterprise PDVSA, the oil giant. Since Chavismo was ushered in, capital consumption has been the order of the day. Physical capital has been consumed at a rapid rate. In short, capital expenditures have been much lower than depreciation, plus amortization (properly measured). PDVSA hasn’t even been investing enough to maintain its capital stock, let alone add to it. Accordingly, the level of water in PDVSA’s bathtub has been falling. If that wasn’t enough, the quality of PDVSA’s remaining capital stock has also been reduced due to poor maintenance practices.

On top of the reduced PDVSA capital stock and its deteriorating quality, PDVSA has witnessed a dramatic drop in the stock and quality of its human capital. After the 2002 coup attempt on President Chavez, he purged thousands of “non-loyalists” from PDVSA and replaced them with political hacks. The purges have continued under President Maduro. In consequence, the stock of quality PDVSA management and workers has been depleted.

Not surprisingly, PDVSA’s production has fallen (see the chart below). Capital consumption has reduced its ability to produce. At present, production is at levels not seen since 1947. Even though it has the world’s largest reserves, Venezuela is producing less oil than the U.S. state of North Dakota, and the rate at which PDVSA is depleting its vast reserves is so slow as to render them worthless. In contrast to the major oil companies that extract a “median barrel” of oil from their reserves in 8-10 years, PDVSA takes 200 years to extract a median barrel.

The collapse in PDVSA’s production is a stunning indictment of the world’s worst oil company and of Venezuela’s socialist system. The bathtub is nearly empty.

Steve H. Hanke | Professor | Economist | Author | Currency Expert | White House Alum. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute. Over four decades Hanke has advised dozens of world leaders from R…

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

***

New Corruption Scheme Revealed at PDVSA

(Prensa Latina, 19.Sep.2018) — The Public Prosecutor”s Office (MP) has revealed today a new corruption scheme in the state-run Petroleos de Venezuela (PDVSA), which has caused losses of 18,500,000 dollars to the main industry of the country.

In a press conference from the MP headquarters in Caracas, Attorney General Tarek William Saab reported that there have been 17 such cases at the oil company over the past year, exposed as part of the state-sponsored anti-corruption campaign.

He noted the authorities have requested nine arrest warrants against managers and officials linked to the fraudulent purchase of 400 aluminum tanks for transporting fuels, without the appropriate technical specifications for their use in Venezuela.

During a national electrical emergency in 2010, it was decided to purchase by direct award to the Mexican entity Trailers and Aluminum Tanks of 300 cisterns, aimed at completing the fleet of the National Transport Company, subsidiary of PDVSA.

This acquisition would also serve to strengthen electric service, as they would be used to provide diesel to the country’s thermoelectric plants, said Saab.

He pointed out that PDVSA paid nearly 19,000000 dollars for 234 cisterns, of which 168 were delivered and 66 were pending, while these deposits did not fulfill the technical specifications required by PDVSA and a new contract had to be made to adapt them.

The attorney general stressed that through the investigations carried out by the Public Ministry, it was determined that the contracted adaptation was never carried out and the cisterns were unusable for their proper purpose.

Likewise, the MP is investigating another contract with the Mexican company Armadora Carrocera Caban, which does not physically exist, according to the results of the investigations.

During the last year, the Public Prosecutor’s Office prosecuted 90 PDVSA officials linked to several corruption schemes.

***

Nicolas Maduro Says Venezuela to Double Oil Production

Venezuela’s President Nicolas Maduro. Source: PDVSA

(Energy Analytics Institute, Piero Stewart, 18.Sep.2018) — Venezuela, the struggling OPEC producer, is now planning to double its production of crude oil, according to statements from the country’s president.

“With revolutionary spirit we will double the productive capacity of PDVSA,” announced Venezuela’s President Nicolas Maduro during a press conference in Caracas broadcast on national television.

Venezuela – reeling in political, economic and humanitarian crises and suffering from the world’s highest inflation – continues to struggle to stop further declines in its oil production amid a near complete collapse in oil sector investments.

According to data in OPEC’s Monthly Oil Market Report, published on September 12 and citing data based on secondary sources, the South American country’s oil production fell 2.9 percent to 1,235 thousand barrels per day (Mb/d) in August 2018 compared to 1,272 Mb/d in July 2018.

***

Venezuela’s Maduro Says Relationship With China ‘Win-Win’

(Energy Analytics Institute, Piero Stewart, 18.Sep.2018) — In terms of bilateral cooperation, Venezuela and China are seeking a ‘win-win’ scenarios.

“Relations with China are very clear and have been framed around mutual respect and under the premise of win-win, which has allowed for the reactivation of financial funds, and revival of sustained development,” announced Venezuela’s President Nicolas Maduro during a press conference in Caracas broadcast on national television.

***

U.S. Company Manager Pleads Guilty in PDVSA Bribery Scheme

(Reuters, 13.Sep.2018) — A former manager of a U.S.-based logistics company pleaded guilty on Thursday to paying bribes to secure contracts from Venezuela’s state oil company PDVSA, and the guilty plea of the official who was bribed was also unsealed, the U.S. Justice Department said.

Juan Carlos Castillo Rincon, 55, pleaded guilty in federal court in Houston to conspiring to violate the Foreign Corrupt Practices Act, the Justice Department said in a statement.

Judge Nancy K. Johnson also unsealed the guilty plea of Petróleos de Venezuela, S.A. (PDVSA) official Jose Orlando Camacho, 46, whom Castillo had bribed, it said.

Camacho had pleaded under seal to conspiracy to commit money laundering in July 2017, the statement said. It referred to Camacho as a “foreign official” but did not specify the position he held in the company, Petroleos de Venezuela.

Fourteen people have now pleaded guilty as part of an investigation by the Justice Department into bribery at PDVSA that became public with the arrest of two Venezuelan businessmen in December 2015.

Castillo, of Conroe, Texas, was arrested in Miami in April after he was indicted by a grand jury, the statement said.

A manager at a Houston-based logistics and freight forwarding company, Castillo admitted to conspiring with others to bribe Camacho from 2011 through at least 2013 in exchange for help in obtaining contracts and inside information about the company’s bidding process.

The Justice Department said that Camacho, of Miami, admitted as part of his plea deal to accepting bribes from Castillo and the company he worked for, as well as conspiring with him to launder proceeds of the scheme.

Castillo and Camacho have agreed to forfeit the proceeds from their criminal activity, and both are scheduled to be sentenced on Feb. 21, the Justice Department said.

***

Venezuela’s Aug. 2018 Oil Output Continues Decline: OPEC MOMR

(Energy Analytics Institute, Jared Yamin, 12.Sep.2018) — Venezuela’s oil production seems on an unstoppable downward trend.

The OPEC country’s production of crude oil fell 2.9 percent to 1,235 thousand barrels per day (Mb/d) in August 2018 compared to 1,272 Mb/d in July 2018, according to data published in OPEC’s Monthly Oil Market Report, published on September 12 and citing data based on secondary sources.

Ecuador

Ecuador’s oil production rose slightly to 529 Mb/d in August 2018 compared to 525 Mb/d in July 2018, according to OPEC’s secondary sources data.

***

Jamaica’s Economy Gets $5 Bln From PetroCaribe Over 13 Years

(CMC, 12.Sep.2018) — Jamaica says it has benefitted from projects estimated at US$5 billion under the Venezuela-led PetroCaribe initiative over the past 13 years.

CEO of the Petro-Caribe Development Fund Dr Wesley Hughes said the contributions of the fund to Jamaica have been “meaningful and significant”.

Speaking earlier this week at a ceremony marking the 203rd anniversary of the Jamaica Letter written by Venezuela’s liberator Simón Bolívar in 1815, Hughes said the PetroCaribe Development Fund, which has a mandate to strengthen national capacity in the areas of human capital, culture, infrastructure and the environment, had established the Simón Bolívar Cultural Centre as an important vehicle in strengthening the friendship between the two countries.

Hughes said the Jamaica Letter has had a “long-lasting impact on Venezuela and on all of Latin America, and I dare say the Caribbean”.

He said the letter demonstrated that Simón Bolívar understood that social and political organisations had to be based on national foundations and must be inclusive of all classes of the people who lived in those societies.

“Today, 203 years later, we stand here, a few metres from where Simón grappled with the ideas of nationhood, independence and national identity, and how leaders should relate to their citizens,” he added.

PetroCaribe is an oil alliance of many Caribbean states with Venezuela to purchase oil on conditions of preferential payment. The alliance was launched on 29 June 2005 in Puerto La Cruz, Venezuela. In 2013 Petrocaribe agreed for links with the Bolivarian Alliance for the Americas (ALBA) to go beyond oil and promote economic cooperation.

***

PDVSA to Reopen Damaged Port Dock by Month’s End -Documents

(Reuters, Marianna Parraga, 12.Sep.2018) — PDVSA expects to reopen the south dock of Venezuela’s main oil port Jose by the end of September, easing strains on crude exports delayed due to a tanker collision last month, according to internal trade documents from the state-run oil firm seen by Reuters.

Last week, PDVSA began diverting tankers to Puerto la Cruz for loading, but the South American country’s crude exports have remained slow in recent weeks as few customers have accepted the 500,000-barrel-per-cargo maximum neighboring terminals can handle.

Besides Puerto la Cruz, tankers waiting to load a total 2.65 million barrels of Venezuelan upgraded and diluted crudes also plan to be serviced this month by two monobuoys at Jose, including cargoes scheduled for U.S.-based Chevron Corp and Russia’s Rosneft, the documents showed.

But a 1-million-barrel cargo of diluted crude oil (DCO) scheduled to be lifted by Rosneft at Jose between late September and early October was cancelled, according to the documents.

Rosneft and PDVSA in April agreed to a “remediation plan” to refinance an oil-for-loan agreement after delays to deliver cargoes of Venezuelan crude on time. DCO shipments scheduled since then belong to that plan.

PDVSA did not immediately reply to a request for comment.

At least three other 500,000-barrel cargoes for Valero Energy and PDVSA’s U.S. refining unit Citgo Petroleum plan to be loaded at Jose’s available docks and monobuoys in the coming days, after delays.

Valero also would pick up two additional 600,000-barrel cargoes of Morichal crude after a maintenance project that would halt the 150,000-barrel-per-day Petromonagas crude upgrader in August was again postponed, allowing more production.

PDVSA and its joint ventures exported 1.292 million barrels per day (bpd) of crude last month, a 7.7 percent decline versus July, according to Thomson Reuters trade flows data.

The country’s oil output fell again in August to 1.448 million bpd, according to numbers reported by OPEC on Wednesday. Venezuela’s accumulated annual production this year is 1.544 million bpd, the lowest since 1950. (Reporting by Marianna Parraga in Mexico City Editing by Marguerita Choy)

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Venezuela Oil Production Continues to Collapse

(Energy Analytics Institute, Jared Yamin, 12.Sep.2018) — The decline is consistent and constant as well as consistently and constantly bad, writes Caracas Capital Market in a research note emailed to clients.

Summary details from the research note follow:

OPEC released the production counts for its member states today and while overall OPEC production was up 278,000 barrels per day (bpd) during the month, Venezuela’s production continued to collapse.

According to OPEC’s August calculations, Venezuela production fell another 36,000 barrels per day (bpd) to 1.235 million bpd. (Venezuela production actually fell 43,000 bpd from the original OPEC July count of 1.278, but OPEC revises their numbers as new data comes in later in the month and moved Venezuela’s July production count down to 1.272 million bpd from the original 1.278 bpd), according to the research note.

“The decline is consistent and constant.”

OPEC calculated that July’s Venezuelan production fall was 42,000 bpd and that June’s fall was 48,000 bpd. In May, Venezuela production fell 43,000; in April, -42,000 bpd; in March, -55,000 bpd; in February -52,000 bpd; in January, -47,000 bpd. Consistently and constantly bad.

In the one year period from August 2017 — when PDVSA was producing 1.918 million bpd — Venezuela has lost 683,000 bpd of production. At the current year average price, that is lost income of $47 million a day and $17.5 billion in a year.

Making this situation worse is that Venezuela’s current 1.235 million bpd production is just a shade more than a third of what the country was producing 20 years ago before Chavez came to power. Hundreds of billions of dollars lost through communism, corruption and incompetence in a country that can ill afford it.

“By the way, we are seeing just one example of how that corruption works in a case playing out before the U.S. Federal District Court in Miami that sucked $1.2 billion from PDVSA in what I label a ‘perpetual money machine for bad guys’ in today’s Miami Herald and El Nuevo Herald, writes Caracas Capital Markets Managing Partner Russ Dallen. “The cast of characters reaches all the way to the top and includes the Derwick boys (especially Francisco Convit), the Boligarch Raul Gorrin (who bought Globovision), the Maduro family (especially the stepsons ‘los chamos’ but also mentions mother Celia Flores and Nicholas Maduro), and a Swiss banker who has copped a deal to tell all (but still had to put up a $5 million bond yesterday).”

Drilling Rigs Fall

Meanwhile, Venezuela’s drilling rig count dropped by one in August, continues the Caracas Capital Market report.

Baker Hughes reports that the number of active drills operating in Venezuela fell to 27 last month, after popping up 2 in July off June’s thirty year low of 26. One of the two drills that was added in July was drilling for gas – the first in over a year. It was still deployed in August.

Having failed to capitalize on its natural gas (much less build the Mariscal Sucre LNG plant) for decades, Venezuela signed a deal last week to link into an already existing gas pipeline at a Shell platform in bordering Trinidad waters and through that pipeline pump gas to Trinidad’s Atlantic LNG plant where it will be converted into LNG for export.

Long time readers will also recall that Rosneft was given a 30 year totally wide-open lease on a gas field in that area last year.

Maduro Goes to China

Finally, as we predicted in our “China Promises Venezuela More Money” Report yesterday and correctly forecast in a Report and Wall Street Journal column in July, Venezuela seems to be making headway in getting help from the Chinese, writes Dallen.

“No one else seems to have been able to accurately uncover and read these Chinese tea leaves, so I am especially proud of our Caracas Capital team. We continue to knock the ball out of the park for our clients,” writes Dallen.

Maduro has just announced that he is going to China to sign some big new deals.

Minister of Oil and PDVSA head Manuel Quevedo is also in Beijing meeting with CNPC and is offering to expand natural gas agreements as well. Yesterday, Venezuela’s oil ministry released a statement touting that the Sinovensa joint venture had increased oil production from 70,000 bpd to 110,000 bpd.

Aside from oil, gas and drilling, we are anticipating some other upcoming ventures in gold mining, coltan and diamond mining, concludes the Caracas Capital Market note.

***

Venezuela Wants To Overhaul State Oil Firm PDVSA

(Oilprice.com, Tsvetana Paraskova, 7.Sep.2018) — Venezuela has set up a commission that will be working to reshuffle and reorganize its state oil firm PDVSA in the next few months, according to the country’s Official Gazette on Thursday, in what would be the latest Venezuelan attempt to show that it is trying to revitalize its dying oil industry.

According to OPEC’s secondary sources, Venezuela’s oil production in July dropped to below the 1.3-million-bpd mark—at 1.278 million bpd, plunging 47,700 bpd from June. This compares with an average of 2.154 million bpd in 2016, and an average of 1.911 million bpd in 2017.

Some analysts expect Venezuela’s production to fall to below 1 million bpd by the end of this year.

Venezuela has been claiming lately that it plans to raise its oil production.

Last week, PDVSA said that it signed a US$430 million joint service agreement with seven companies that would help it increase its crude oil production by 641,000 barrels per day.

On top of the incessant production slump, PDVSA has seen difficulties in exporting its oil cargoes after a partial closure at the Jose port at the end of August delayed shipments.

A week before that, ConocoPhillips reached a settlement with PDVSA to recover the full US$2-billion amount that an international court awarded it earlier this year for the expropriation of its oil assets in Venezuela a decade ago. PDVSA agreed to settle the dispute with Conoco and possibly save some assets in the Caribbean from seizures, as the U.S. oil firm said that it would be suspending the legal actions to enforce the award.

PDVSA has 90 days from August 20 to make the first US$500 million payment of the award to Conoco. On September 5, Conoco’s chief executive Ryan Lance said that the U.S. company was still awaiting the payment, but expected Venezuela to honor the settlement agreement. If payments aren’t made, however, ConocoPhillips would resume its legal enforcement actions, Lance noted.

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Tanker Backlog Builds Again in Venezuela

(Reuters, Marianna Parraga, 6.Sep.2018) — Crude exports by Venezuela’s PDVSA have slowed after a tanker collision at its main port last month disrupted operations, adding to a backlog of vessels waiting to load, according to shipping sources and Reuters data.

Oil is the financial lifeline for the embattled socialist government of President Nicolas Maduro, but his cash-strapped administration has failed to invest enough in the industry to prevent its decline. Venezuela has sought to increase exports after asset seizures and declining output earlier this year raised the prospect of temporary suspension of contracts.

PDVSA has not said how long it will take to repair damage from the collision and resume normal loading and discharging operations. The company did not immediately reply to a request for comment.

Last week, PDVSA offered loadings at an alternative port to crude customers whose shipments were affected by the collision, but only a few have accepted so far, the sources said. That alternative, the Puerto la Cruz terminal, is limited to loading 500,000 barrels of crude per tanker, far less than the 2 million barrels PDVSA’s main port of Jose can handle.

Large tankers including three Suezmaxes and seven Very Large Crude Carriers (VLCCs) are lined up off Jose waiting to load at the available docks and monobuoys systems.

The vessel backlog around PDVSA’s ports has been increasing since late August, following the collision. As of Sept. 6, more than 20 tankers were waiting to load 26 million barrels of Venezuelan crude, according to Reuters Trade Flows and vessel tracking data.

PDVSA’s crude exports rose in July to 1.39 million barrels per day (bpd), the most since November, but last month they slipped almost 8 percent to 1.29 million bpd on Jose port’s partial operations, falling oil output and Caribbean terminal seizure attempts by creditors including U.S. producer ConocoPhillips, according to the Reuters data.

One of PDVSA’s main customers, Russia’s state-run Rosneft, loaded a 925,000-barrel cargo of diluted crude oil (DCO) during the weekend at one of Jose’s monobuoys after being diverted from the South dock, still closed because of the collision.

Rosneft-chartered Nordic Moon set sail to Malta on Sunday after waiting to load in Venezuela since early August. But the Russian company still has other four vessels waiting to load up to 6 million barrels of heavy crude at Jose, according to the data.

Jose’s South dock, which suffered damage from the collision last month, is mainly used for shipping Orinoco Belt crude and discharging imported naphtha used to dilute the country’s extra heavy oil and make it exportable.

Reporting by Marianna Parraga; Editing by Steve Orlofsky

***

Venezuela Creates Commission to Reorganize PDVSA: Document

(Reuters, 6.Sep.2018) — Venezuela has created a commission to reorganize state oil company PDVSA in the coming months, according to the Official Gazette circulating on Thursday.

PDVSA did not immediately respond to an email seeking further details.

Reporting by Caracas newsroom; Editing by Chizu Nomiyama

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Venezuela Oil Sales to US Fell in August

(Reuters, 4.Sep.2018) — Venezuela’s crude sales to the United States fell in August for the second month in a row as exports of two of the South American country’s main grades dropped following port interruptions by a tanker collision, according to Thomson Reuters Trade Flows data.

Venezuela’s state-run oil company Petróleos de Venezuela, S.A., known as PDVSA, and its joint ventures last month exported an average of 468,300 barrels per day (bpd) of crude in 30 cargoes to their customers in the United States, the data show. The total was the third smallest monthly figure this year.

PDVSA’s oil shipments have been affected in recent weeks by export limitations at the country’s main oil port, Jose, after a minor tanker collision forced the state-run firm to halt operations at one of its three berths.

The Jose dock problem came as the country was attempting to reverse a series of blows to oil exports, including declining output, a severe lack of investment in its energy infrastructure and asset seizure attempts by creditors.

PDVSA last week started a contingency plan for diverting tankers waiting at Jose to load to the nearby terminal of Puerto la Cruz. It has not said for how long Jose’s loadings would be affected.

The state-run company last month exported to the United States a 500,000-barrel cargo of Merey crude and three 500,000-barrel cargoes of Zuata crude, two of the OPEC-nation’s main grades for exports. Both come from the Orinoco Belt, Venezuela’s largest oil producing region.

Crude upgraders at the Orinoco, essential for turning Venezuela’s extra heavy oil into exportable grades, have been working intermittently in recent months due to planned maintenance and outages, limiting volumes available for export.

U.S. refining firm Valero Energy was the largest receiver of Venezuelan crude last month with 153,000 bpd, followed by PDVSA’s unit Citgo Petroleum and Chevron Corp , according to the data.

Shipments to spot customers in the United States continued falling to some 40,000 bpd in August, the second smallest monthly figure so far this year.

(Reporting by Marianna Parraga; Editing by Richard Chang)

***

Kamla Floats Guyana Help for Trinidad Refinery

(Stabroek News, 2.Sep.2018) — Trinidad Opposition Leader Kamla Persad Bissessar has raised the prospect of Guyana oil being used to rescue the beleaguered Petrotrin refinery but Prime Minister Keith Rowley last evening said the aged facility had no reasonable prospect.

Defending the decision by his government to close the over 100- year-old refinery, Rowley yesterday said he had no choice as the climbing debt was too much to saddle his country’s taxpayers with.

“Petrotrin was overburdened with debt. The net debt at financial year-end 2015 amounted to TT$11.4 billion,” Rowley told the twin-island nation in an address which was live streamed.

According to the Trinidadian Prime Minister, “Left as it is, Petrotrin will require an immediate TT$25 billion cash injection just to stay alive” and “there is no way that the company can find this money” as “no financier will lend it because the company simply will not be able to repay such an additional loan.”

He believes that it would be more feasible for the country to focus on exploration and production and export the 40,000 barrels of oil equivalent per day it produces and import the 25,000 barrels it needs for consumption.

“Today with a refining capacity of 140,000 barrels per day, the local production available for refining is 40,000 barrels. We really depend, mostly, on a daily importation of 100,000 barrels per day, which we refine at a significant loss.”

He would later add, “We consume less than 25,000 (barrels) of refined products. It makes far more sense to export the 40,000 that we produce and import what we need. Each barrel will be sold externally on the open market.”

Last week Tuesday it was announced that Petrotrin’s refining and marketing operations would be shuttered. With TT$8 billion in losses in the past five years and a bullet payment of US$850 million due in 2019, Petrotrin chairman Wilfred Espinet had said that terminating its refining and marketing operations and retrenching 1,700 permanent and casual employees was the only way to save the company after 100 years of operations in the industry. Petrotrin also owes the Trinidad Government more than TT$3 billion in taxes and royalties.

Rowley’s position last evening came even as that country’s former Prime Minister, Persad Bissessar called on him to pursue negotiations with Guyana to refine its oil there in order to save the company.

“I understand Guyana has found another well … can we not group in some way and find a way to work together as a CARICOM where we can help them refine their oil,”  she told reporters on Saturday at her Legal Clinic Siparia Constituency Office and which was reported by the Trinidadian newspaper Newsday. Guyana won’t begin pumping oil before 2020.

“I am calling on him to let good sense prevail to be very cautious in making such a drastic and dangerous move, this will have a ripple effect throughout the economy and the country…of course they (Guyana) will build their own refinery but we have one and many of the units in the refinery at Petrotrin are new, so a lot of money has been invested on the refinery side and now they are shutting it down. It is total nonsense,” she added.

Currently, it is still unclear what the Guyana Government would do with its share – 12.5%  – of profit oil from 2020 onwards, from its agreement with ExxonMobil but one government official said that several options are being explored.

One Minister yesterday said that it “Is an ongoing discussion and several workshops and engagements have been held. The options are to ask Exxon or to market, do our own marketing or take our share in kind and send it for refining somewhere. Several proposals have been received and the final decision-making process will be guided by the Department of Energy.”

Stake

Sources have told this newspaper that it has been suggested to the government that Guyana “takes a stake in the Petrotrin refinery and in this way acquire a strategic asset.” In that way, according to one source, Guyana could have its share of oil from the agreement with ExxonMobil and affiliates refined closer to home and secure jobs for persons in both countries.

But while it is still too early to tell what the Guyana and Trinidad governments will decide, a source said, “Guyana may gain a controlling or sizeable share and develop refining capacity and meet many of the outcomes from having a refinery without having to pay as much. Additionally, we can ensure that a percentage of labour is Guyanese who will have to be trained and also we can address some CARICOM integration goals.”

Last evening, the Trinidad PM  made no mention of Guyana or even hinted at restarting the refinery although he said that Petrotrin’s refinery assets would be placed in a separate company.

“We largely operate a business that is largely dependent on foreign oil inputs. All the other refineries in the region that had this same business model, Aruba, Curacao and St Croix have long since closed because they saw it as not a viable business,” Rowley said.

“Our Pointe-à-Pierre refinery is 101 years old and has reached the end of its commercially viable days it is now at a state where it is haemorrhaging cash and the cost of rehabilitating it is way more than its potential to ever be potentially viable, competitive or sustainable. The only commercially sound and viable option is to close the refinery, export Petrotrin’s oil and to import products,” he also noted.

The government of the US Virgin Islands last month approved a proposed US$1.4-billion operating agreement between itself and Arclight Capital Partners LLC, Boston, to restart the former Hovensa Refinery at Limetree Bay, St Croix. The refinery is scheduled for opening by the end of 2019. With an initial crude processing capacity of about 200,000 barrels per day according to the USVI government, the investment is expected to create 1,200 local jobs during construction and as many as 700 permanent jobs upon restarting the facility. The Hovensa refinery was a joint venture between Hess Corporation and Petroleos de Venezuela until it closed in 2012.

Rowley said that the Petrotrin model has outlived its usefulness and it was now time to accept that and equip the company to stand the test of the ever changing global economy.

“Petrotrin’s model has become obsolete and uncompetitive and its operating practices are inefficient. The company was nowhere in line with global industry standards and best practices. In fact the company’s operations are identified as being among the most inefficient in the world. The company if left as it is would continue to operate at a loss at a rate of aboutTT$2B a year. It is not a viable option, to do so is to saddle future generations with a huge debt burden. If not dealt with now, the negative effects will get worst and it simply cannot work. To break even would cost TT$7B and would involve significant staff cuts and an ultra-low sulphur refinery,”

He believed that the “Gross mismanagement of the national patrimony within the last decade” such as many cost overruns and delays in projects for the company  was part of the reason government is now saddled with the large debt.

A committee, headed by TT’s former Energy Ministry Permanent Secretary, Selwyn Lashley, had reported on the dismal state of the company since 2016 and the report showed that in addition to receiving huge subsidies from the state, Petrotrin was not paying its fair share of taxes collected to government.

“Taxes and royalties owed to Government amounted to $3.1 billion as at February 28, 2017. The company was not complying with the tax laws and even when it collected taxes from companies that paid their taxes to Petrotrin for onward transmission to the Ministry of Finance, Petrotrin was huffing and utilizing those monies in its own operations.”

“Money that should be turned over to the Ministry of Finance is held within the company and that is illegal,” he added.

***

Scorch Earth Suicide in Venezuela

(EnergyNomics de Venezuela, Carlos A Rossi, 1.Sep.2018) — Nicolas Maduro has drawn the line in the sand: “Either you are with me and stay here living precariously with Chavism, or you are against me and get out. If you choose none of the above: Starve.”

Cornered by a hyperinflation over 33,000% and climbing, expected to reach a million percent at years end by the IMF, a cumulative fall in the GNP of 50% since he took office in 2013, oil production to 1.2 MMb/d or 1947 levels despite harboring the largest oil reserves in the planet, plus a myriad of human miseries in education, medicine, scarcity, spontaneous protest all over and unprecedented exodus to near and far away nations and a long etc, not to mention the scourge of its neighbors and a standing military threat from the most powerful country in the World, Nicolas Maduro has had enough and on 17th of August, hereafter to be known as Red Friday, he announced a string of economic measures with the sole intent of what can only be interpreted as “Scorch Earth Policy”.

Defined: Scorch Earth Policy is “a military strategy of burning or destroying buildings, bridges, crops, water holes, or other resources in your homeland that might be of use to an invading enemy force”. Example, what Russia’s Red Army was forced to do when the Nazis invaded them in 1940. In Venezuela’s context the enemy is already here, as 82% of the people who oppose his ruling. Since the failure of Chavism in his mind can only be explained by “national and foreign economic war”, scorch earth is his only remaining option.

In his speech this fateful Red Friday Maduro defined many measures of which 3 stand out:

1) A sharp increase in the price of gasoline to international levels,

2) A unified exchange rate anchored to the governments “Petro” virtual currency, and

3) A 3,500% increase in the minimum wage.

Other measures like modest increases in income and value added taxes are minor and will not be discussed here except to say that in an economy that is in clear depression mode the increase of any kind of taxes further deteriorates consumption demand, a prerequisite for recovery.

Lets start with the sharp rise in the price of gasoline. It is actually a step in the right direction and one that I have been urging over the years. As is, at U$0.01 per liter is by far and away the cheapest in the world, second place Iran is 25 times more expensive; neighboring Colombia is 77 times more expensive and in the USA a motorist pays a full 83 times more than Venezuelans pay. This means that for what each American motorist pays to fill the gas tank of her sedan Venezuelans fill it 83 times!

This is not only beyond ridiculous but detrimental to Venezuela in many fronts:

First, it is a regressive tax on the poor who don’t own cars while the rich and middle class does.

Second, it fuels conspicuous driving consumption leaving less for exports, which would fetch tons of more money for the government.

Third, it provides irresistible incentives for contraband to neighboring Colombia and Brazil (114 times more expensive) (1).

The estimate of revenue losses to the nation for this practice has been estimated by the Venezuelan government to be anywhere between $18 billion and $20 billion per year. In fact, I strongly suspect that a big reason for this price hike is a vengeance move from Maduro to Colombia’s newly elected President Ivan Duque, who has taken a strong stance against the Venezuelan dictator.

Fourth, and finally, in other countries sharp gasoline price increases have absorbed excess liquidity from the public thus contributing to lowering fiscal deficits and inflation to normal levels (eg. Bolivia in 1980s). I said as much when I urged this policy years ago; but now I strongly doubt it would have much effect because Venezuela’s hyperinflation is foolishly fueled by the other policies of state production control, scarcity, and uncontrolled fiscal deficit of about 17% of GDP, all of which will surely exacerbate in the wake of Red Friday; even if the government successfully inoculates food transportation to the cities.

As I write these lines the government has not legally printed the new gas prices in the Gaceta Oficial, the official Gazzete that initiates the legality of any law or decree in Venezuela. To equate Venezuela’s current gas price with the international level, now at $1.16per Lt, it implies an increase of 11,500%. A much abrupt measure to be absorbed by anybody at once. But there is a caveat. Those citizens that own the “fatherland card”-the official identity card of chavism-will be exonerated from this increase by receiving at a “later date” a direct compensation into their bank accounts, or so they say, a clearly apartheid measure against most of us (>80%) that abhors what chavism has turned out to be. The experience of this plan in Iran has been reportedly good. The problem of course is that it’s hard to imagine any nation in the entire planet with a worst record of fulfilling a “Plan” than Venezuela.

But in conclusion, on balance this move is actually a plus, although it was done belatedly, much abruptly, and with clear intentions of apartheid.

Moving on, the unified exchange rate anchored to the Petro-Cryptocurrency has a so- so part and a terrible part. The unified part is good because as it stands, the complexity of 3 official levels far distant from each other plus a black parallel market exchange rate reported by a Miami private web site, where the vast majority of the transactions take place since the others are inaccessible and impractical (2). This time Nicolas Maduro did it, although again much belatedly, under much pressure, and surrendering to the Miami Web site; the level he put is almost exactly at the parallel market rate that they reported. But it is also, as my college and National Assembly member Jose Guerra reported, the single worst devaluation this country has ever experience in terms of magnitude. Maduro’s official rate devaluation this Red Friday was over 2,311%, by far dwarfing the previous 1989 mega devaluation of 134%. These sky high figures are dwarfed by the more deep space numbers of the parallel black market exchange rate: In 2018 alone this parallel exchange rate has devalued 2,332% and if you go back when Maduro started his administration, it has devaluated over 23,300,000%.

I call it so-so, a euphemism for mediocre, because it is good that Venezuela has a unified exchange rate that reflects the now market value of a strongly deteriorated exchange rate. However, what this is going to do to import costs of everything from food seeds to pharmacies, auto parts, PDVSA equipment and a long etc is downright horrible. The government has since announced that they will not auction dollars to the public because, as everyone knows, they don’t have any to offer (Venezuela’s external reserves are down to about $9.3 billion, about $1.5 billion of which is liquid and the rest are in Gold Bars that only the government is sure where they are-Middle East?). What they will auction is Petros. This leads us to the surreal and terrible part of this plan.

Cryptocurrency Petro

The anchoring of the exchange rate to a cryptocurrency Petro. The idea is for the State to link the Bolivar to the Petro and link that to the Price of Oil of 5,342mm of certified barrels of crude oil in the oil rich Orinoco Oil Belt (set at $60). So far so good because as opposed to Bitcoin that only depend on blockchain technology, the Venezuelan government is the only one allowed to mine this cryptocurrency that is linked to a tangible wanted energy source. But this is were the problem lies. First it breaks not 1 but 2 constitutional laws. The only currency that the Venezuelan Constitution allows to circulate in any form of exchange is the Venezuelan Bolivar which is also supposed to be anchored to oil exports and we already explained how the government managed that. Second, the only institution that can change this is the legitimate National Assembly which is majority controlled by the opposition, and since Maduro bulldozed their legality and ran most of them to exile, including its President Julio Borges, its hard to imagine any of them vouching for the Petro, let alone the required majority.

The second law that the Petro breaks is the guarantee, because again by constitutional law all mineral underground resources belong to the Venezuelan State, not the Government, and any deal that involves oil not yet produced must be agreed by the National Assembly, which will, again, never do. This means that if the government welshes on their commitment, as they have done numerous times, there is no way any Petro holder would be able to execute any guarantee. There is a further problem. The United States Treasury Department has formally announced direct sanctions on anyone dealing the Petro. So the Venezuelan government anchored its exchange rate on something that does not legally exist, that cant exist, and even if it does exists it will be quelled by international sanctions. This government is of course knowledgeable of all of these misfortunes but they went and did it anyway. This is Scorch Earth Policy, pure and simple.

The icing on the cake is the last policy, the outrageous and humongous 3,364+% wage hike of the minimum wage to what is today 180million bolívares per month, or in next month parlance, 1,800 Bolívares (1/2Petro) since the government also erased 5 zeros from its bills. This of course would create massive unemployment but since firing anyone is illegal here, what in all certainty will happen is massive private company closures thus creating massive unemployment. As companies shut down so will banks because they will not be able to recover their outstanding loans and will not be able to pay their own loans. As they collapse, a domino effect occurs were all privately owned pharmacies, clinics, insurance companies, food outlets, entire industrial and agricultural sectors will close shops, then the State will capture them and will thus nail down what it has always wanted, a full Communist nation. Judging from how the government has ran its already owned production and distribution facilities, its not hard to phantom what the only possible result of this will be.

Fiscal Deficit

The implications of this move to the fiscal deficit are clear. The government has about 3 million employees working in the Central Government plus an additional 3million retired people that earn the minimum wage and add a possible 600,000 people that work on contractual basis, including police in the nations municipalities etc, that also earn minimum wages. Where are they going to get the money to pay all these people? The only answer is the printing machine. But when they do this, they are either going to kill what’s left of the international reserves or destroy the Petro anchoring strategy in a month and create a black-markets for everything. In addition, the government has said that they will cover the PYMES (small and medium sized companies) payroll for 90 days. Are they really? Is a pharmacy in a far-out post in Delta Macuro State going to get this every fortnight? I don’t think so. And what about the large companies like Polar, how are they going to pay their people whom they need to produce the little people eat here?. The government is imposing price freezes in their products and raising their payroll 35 times!. GDP collapse and Scarcity galore. There is but one interpretation of this. “I am taking over everything.”

The final implication being, as stated above: “I know you are after me USA, Europe, Latin America, Canada, but if I am going down this ship is going down with me.”

Conclusions

So what are Venezuelan’s supposed to do?: Submit themselves to this hellhole quietly? Unlikely. Leave the country by sparking up what is already an enormous exodus? More Likely. Wait for a Pinochet style military coup? Possibly but only if an international threat is real. Worthwhile mentioning, these economic measures were announced the day before the legitimate National Assembly voted unanimously to uphold the ruling of Venezuela’s legitimate Supreme Court (in exile) to oust Nicolas Maduro and jail him for 18 years+ on charges of corruption. The importance of this measure cannot be overstated; for it means that a military push on Maduro cannot be seen as a constitutional break down or “coup”, since they would be fulfilling the mandate of the legitimate constitutional institutions, the National Assembly and the Supreme Court. On the contrary, if the military decides (as it looks like they are) to maintain Nicolas Maduro in power, that would be seen as a military coup by international observers.

What about an spontaneous social implosion? Likely too except that if history is any guidance the words spontaneous and successful do not go together in political movements. The memories of the 140 killed in last year’s uprisings are still fresh and create understandable fear. As it happened in India with Gandhi, South Africa with Mandela, Poland with Walesa and here in Venezuela with Betancourt in the late 1950’s and others Unified leadership and a Plan for the Day After is required; because the first identifies people with the movement and the latter assures them that they will not jump the plane without a parachute. But today given the disgraceful behavior and inflated egos of the Venezuela’s opposition parties any unity amongst them would be a miracle3. They even abstained from voting in the Constitutionally mandated Presidential Elections last May when they had Maduro on the ropes with 22% polling popularity and, at the time, over 100.000% inflation!4. What about creating destabilizing atmosphere through workers and owners strikes to breed the ground for a foreign coalition of humanitarian intervention, knowing well that whatever its results will be better than Chavism? Maybe. All of the Above? YES, Certainly, You Bet!!

Yes, the announced economic policies of Nicolas Maduro are scorched earth suicidal, just not for Venezuela.

“Tyranny cannot possibly reign but over the ignorance of the people”

Francisco de Miranda

NOTES:

1) Gas petrol stats from GlobalPetroPrices.com

2) Thru out Chavez-Maduro’s terms in office this official rates have been called, at various times, Cadivi; Sicad; Sitme and Ditcom. All of them failed for the same reason; none of them could have enough foreign currency to meet demand or deliver it quickly enough. So people were left with no choice but to deal at the much more expensive private black parallel market rate. The ultimate humiliation: that was controlled by a Miami based web page called DolarToday who daily set its official price from the daily average transaction of Vzla. Bolivar-US$ in Cucuta (a border Colombian city in the Andes).

3) EnergyNomics, in my person, has such a plan in the Venezuelan economic sectors that matter most. Including foremost Energy. The works of Albert Hirschman highly influenced this work, among others.

4) Please read this firms a detailed account of that fateful event here.

***

 

PDVSA Inks $430 Mln Deal in Effort to Boost Oil Output

(S&P Global, Mery Mogollon, 30.Aug.2018) — State-owned Venezuelan oil company PDVSA signed a $430 million service agreement with seven companies to boost its oil production by 641,000 b/d, company president Manuel Quevedo said in a statement Wednesday.

The companies on the other side of deal are: Well Services Cavallino, Petro Karina, Helios Petroleum Services, Shandong Kerui Group, Rinaca Centauro Karina Consortium, Oil Consortium Tomoporo and Venenca. The companies will help boost output from wells in the Arecuna, Sanvi Guere, Orocual, Dacion, Jusepin, Franquera-Tomoporo and Carito-Pirital fields, the statement said.

According to the statement, current production at the fields is 384,000 b/d.

“We have the opportunity to increase oil production at these fields by 641,000 b/d,” said Quevedo.

“We will provide legal security, investment facilities and the production of each barrel of crude will be recognized a fair rate,” Quevedo added.

Venezuela holds the world’s largest crude reserves, but has seen its oil industry crumble amid mismanagement, corruption and a lack of investment.

Venezuela’s crude output fell to 1.2 million b/d in July, according to the latest S&P Global Platts OPEC production survey.

In 2007, the Venezuelan government expropriated assets from international companies that operated light, medium, heavy and extra-heavy crude fields under contracts signed in the 1990s.

***

Venezuela Aims To Boost Oil Output By 640 Mb/d

(OilPrice.com, Tsvetana Paraskova, 30.Aug.2018) — Venezuela’s state oil firm PDVSA has said that it signed a US$430 million joint service agreement with seven companies that would help it increase its crude oil production by 641,000 barrels per day.

The companies will help PDVSA to raise production at wells at the oil fields Arecuna, Sanvi Guere, Orocual, Dación, Jusepín, Franquera-Moporo, and Carito – Pirital, the state firm said in a statement.

Currently, the 14 wells where Venezuela will look to boost production pump 384,000 bpd, Oil Minister Manuel Quevedo said, adding that “we have the opportunity to raise production by 641,000 bpd,” and hailing the agreement as “the beginning of a new era at PDVSA.”

This is not the first time that Venezuela has claimed it has grand plans to boost its production. Quevedo said last month that he had discussed plans with PDVSA to raise the country’s crude oil production in the second half of the year.

Venezuela is suffering the worst loss of oil production in history amid an unprecedented economic collapse, years of mismanagement and underinvestment in the oil industry, an aggravating humanitarian crisis, and a leader who is hell-bent on clinging to power. Venezuela’s inflation will surge to a staggering one million percent by the end of this year as the country with the world’s biggest oil reserves remains stuck in a profound economic and social crisis, the International Monetary Fund (IMF) predicts.

Venezuela’s collapse, alongside U.S. sanctions on Iran, have been putting upside pressure on oil prices for months, and is expected to continue to do so, as analysts don’t see an end to the crisis in sight.

According to OPEC’s secondary sources, Venezuela’s oil production in July dropped to below the 1.3-million-bpd mark—at 1.278 million bpd, plunging 47,700 bpd from June. This compares with an average of 2.154 million bpd in 2016, and an average of 1.911 million bpd in 2017.

Some analysts expect Venezuela’s production to fall to below 1 million bpd by the end of this year.

***

The Latest Episode in the Crystallex-Venezuela Saga

(Mining.com, Valentina Ruiz Leotaud, 29.Aug.2018) — State-owned Petróleos de Venezuela SA or PDVSA announced on Twitter that it filed an appeal requesting that a Delaware court vacate a decision made public on August 23 granting Canadian miner Crystallex the right to seize its U.S. assets.

In its statement, the oil company said it had filed a petition on Friday, August 24, 2018, to the 3rd U.S. Circuit Court of Appeals. The petition is to direct the Delaware District Court to acknowledge it had been “divested of jurisdiction with respect to PDVSA and its property.”

The petition refers to a decision made on August 9, 2018, by U.S. District Judge Leonard Stark in the eastern U.S. state. Stark approved a request by Crystallex to attach shares in PDV Holdings, a U.S. subsidiary of PDVSA that indirectly controls refiner Citgo.

Citgo owns three refineries in Louisiana, Texas and Illinois, as well as other assets that have been valued between $8 billion and $10 billion.

With this move, Crystallex is aiming at collecting a $1.4-billion-award in compensation following a decade-long dispute over Venezuela’s 2008 nationalization of its gold mine in the southern Bolívar state. The amount is comprised of $1.2 billion plus $200 million of interest awarded by a World Bank arbitration tribunal in 2016.

If PDVSA’s appeal does not proceed, the Nicolás Maduro government could be forced to comply to Crystallex’s demands.

The Canadian firm has accused the Nicolás Maduro government of performing “fraudulent transfers” to avoid paying what it owes. Among those transactions, Crystallex has cited the payment of dividends from PDV Holding to PDVSA for $2.2 billion and the issuance of 49.9% of Citgo’s shares to secure a $1.5 billion loan granted by Russian giant Rosneft in 2016.

A lawsuit introduced by the miner against such asset transfers by Citgo was initially dismissed in January 2018, but the Toronto-based company requested a new hearing.

Nevertheless, PDVSA’s lawyers have argued that Crystallex cannot seize the holding company’s shares because it doesn’t have proper grounds for suing in the U.S. and because it couldn’t show the unit was the Venezuelan company’s “alter ego.”

In November 2017, Crystallex and Venezuela agreed to settle the dispute before Ontario Superior Court Justice Glenn Hainey. However, the deal did not resolve the fight over the $1.2 billion award because the cash-strapped South American country did not honour its payments.

With files from Reuters, Bloomberg, El Universal.

***

CITGO Awards Grant, Continues Restoration Work

(Citgo, 29.Aug.2018) — Through the CITGO Caring for Our Coast initiative, a program designed to boost ecological conservation, restoration and education, The Conservation Foundation (TCF) has been awarded a grant to continue its restoration work in the Heritage Quarries Recreation Area (HQRA) in Lemont.

In partnership with TCF and the Village of Lemont, the CITGO Lemont Refinery has been funding semiannual projects and working alongside local volunteers in the HQRA since the fall of 2014, removing invasive plant species and brush, and harvesting native species’ seeds for replanting.

Located half a mile east of downtown Lemont, the HQRA is situated among thousands of acres of forest preserves, which includes more than 65 miles of hiking and biking trails, as well as access to fishing and boating along the I & M Canal and the Consumers, Great Lakes and Icebox Quarries.

According to Scott LaMorte, senior advancement officer at TCF, the transformation of the HQRA, in just four years, has been remarkable.

“During a community workday last year, my group was assigned to clear a section near the picnic grove. After cutting out some of the weedy shrubs, we uncovered a pond that hadn’t been seen in decades! The ‘before’ and ‘after’ photos are just incredible,” said LaMorte.

Dennis Willig, Vice President and General Manager of the CITGO Lemont Refinery, describes the HQRA project as neighbors-serving-neighbors.

“We are proud to partner with the local community, because not only are natural resources being preserved, but residents will be able to enjoy the benefits of this outdoor recreational space for years to come,” said Willig.

***

Carolyn Wants Details on Dragon Gas Deal

(Trinidad and Tobago Newsday, Sean Douglas, 28.Aug.2018) — Four questions have been posed by Congress of the People leader and former energy minister Carolyn Seepersad-Bachan over the Dragon gas deal signed on Saturday between the leaders of TT and Venezuela.

“Whereas the government may not be able to publicly state the agreed price for gas produced from the Dragon field, it ought to provide details on the pricing formula and other emerging issues related to this project,” she said in a statement yesterday.

Saying the field will boost this country’s gas supply for both liquefied natural gas (LNG) and the petrochemical sectors, she said each use of gas is priced separately.

“In the case of LNG, the price at the well-head is determined based on the net back pricing formula, and in the case of the petrochemical sector NGC’s (National Gas Company’s) re-sale prices are linked to international commodity prices.

“If the same approach is not applied to the pricing of the Dragon gas, the NGC is at risk of its sale price being lower than its cost price thus incurring huge losses.”

Secondly, Seepersad-Bachan asked what is TT’s obligation to the special purpose vehicle (SPV), formed with Shell and PDVSA to build a 30 kilometre gas pipeline for US$100 million.

“What is the percentage holding of NGC in this SPV as this will dictate capital investment required for this project? Additionally, at what point does fiscalisation occur?”

Thirdly, she wondered about the deal in light of the current state of affairs in Venezuela. “Has the Government taken into consideration the geopolitical risks, which significantly impact on the viability and reliability of this project?” Would future governments of Venezuela honour this deal to supply gas at the agreed pricing?

If not, the NGC and the citizens of TT would bear the full cost of lost revenue for ALNG and petrochemical companies, Seepersad-Bachan said. “In addition, the literature is replete with examples of expropriation of assets in the Venezuelan energy sector. This places the US$100 million investment at risk should such an event occur. The Government and the NGC must openly indicate to the citizenry how they intend to mitigate these risks.”

She said answers to these questions will show whether this is “a theoretical dream or an implementable reality.” Seepersad-Bachan alleged Energy Minister Franklin Khan had erroneously likened the Dragon project (which fully lies within Venezuelan territory) to the Loran Manatee project which is a cross-border field.

***

Venezuelan Oil Port Working Partially After Collision

(Reuters, Marianna Parraga, 28.Aug.2018) — Venezuela’s main oil port of Jose is operating partially following a weekend tanker collision that halted one of its three docks, curtailing state-run PDVSA’s ability to export upgraded crude and receive imported diluents, three sources with knowledge of the incident said on Tuesday.

PDVSA has been struggling this year to deliver exports on time to most customers due to falling oil output, legal actions by creditors aimed at seizing overseas assets and U.S. sanctions. In July, the country’s crude production fell to its lowest level in over 60 years.

Crude exports from Jose were running earlier this year at about 900,000 barrels per day (bpd), according to Thomson Reuters data. Some 60,000 bpd of naphtha imports, which is used to dilute Venezuela’s extraheavy crude for export, also are received at the terminal.

The collision shut the South dock, one of Jose Offshore Platform’s three oil berths – East, West and South – and two monobuoy systems, used to ship crude from the Orinoco Belt, Venezuela’s main producing region, and to discharge imported diluents. The South dock was refurbished in 2016.

“Jose’s East and West docks are totally busy. Each VLCC (Very Large Crude Carrier) takes up to five days to load. There is not extra capacity for discharging naphtha imports and more upgraded crude exports there,” one of the sources said.

PDVSA did not immediately reply to a request for comment.

PDVSA’s upgraded crude, produced at four upgraders that convert Venezuela’s extraheavy oil into lighter grades, is mainly exported to the United States, a market that has seen a 26-percent decline in imports of Venezuelan crude this year, according to Thomson Reuters Trade Flows figures.

***

Venezuela Gas Price Deal Competitive—Khan

(Trinidad Guardian, 27.Aug.2018) — Government is giving no details on the pricing structure this country will pay for gas from the Dragon Field under the agreement signed with Venezuela on Saturday, but Energy Minister Franklin Khan is assuring that the pricing structure agreed to was competitive and followed “months of negotiation, serious intervention, serious sharing of information and serious sharing of economic models, to come up with an appropriate gas price”.

Speaking during a press conference at the Hyatt Regency in Port-of-Spain, yesterday, Khan said, “It is no cheap gas. It is competitively priced gas and is obviously no secret Dragon deal.”

Khan said Venezuela has the largest oil reserves in the world, larger than Saudi Arabia, Russia and the United States and has the fifth largest gas reserves in the world, which this country can benefit from.

“It’s a win-win situation, especially since we in Trinidad face challenges on the supply side,” he said.

T&T, he said, also has world-class gas infrastructure through which Venezuela can monetise its gas.

“This provides an ideal opportunity for Trinidad and Venezuela. If I can say so, I think it is a marriage made in heaven,” Khan said.

Khan said he took “umbrage” with the way the media reported on the deal signed in Caracas on Saturday by Prime Minister Dr Keith Rowley and Venezuelan President Nicholas Maduro, as he dismissed a report in another daily newspaper that under the deal the T&T Government would be buying the gas at a mere US$1 per MMBTU. Khan said that was simply trying to create mischief by telegraphing to the Venezuelan people that the government was selling “cheap gas to Trinidad and Tobago”. However, he said the price being paid was substantially more.

Both countries, according to Khan, have benefitted, as T&T could import the gas, process it into LNG and for downstream petrochemicals “and still make a profit and it is a price acceptable to the Venezuelans to get a good monetary return for the resources they own.”

Khan said when Rowley was asked by T&T Guardian journalist Curtis Williams about the price, “Dr Rowley said these gas prices are subject to strict confidentiality clauses. However, he took the liberty to say the prices are very competitive and in some cases lower than what we are paying to domestic upstream producers in Trinidad and Tobago”.

He said it was widely known in the energy sector that “the commercial terms of gas sales agreement are subject to the strictest confidentiality clauses”. As he revealed that he could not even answer a question in the Parliament on pricing when asked some time ago, he said because of the confidentiality clause.

“No government past or present, UNC or PNM, has ever made known to the public any negotiated price of gas,” Khan said.

The PM did, however, reveal that under the agreement the volume of gas to be provided will be 150 million cubic standard feet per day with an option to go to 300 million standard cubic feet per day.

On Saturday, Rowley and Maduro signed two documents – a base term sheet for the Dragon Gas deal which set out the commercial term for the gas sales agreement, including volume and price, which was signed by the Venezuelan state oil company PDVSA, Shell as the private investor and the National Gas Company.

Another agreement was signed where both governments committed to the implementation of the project and to see it to finality. Khan said while it was a cross-border relationship with Shell, PDVSA and NGC, “at its most fundamental level it is a government to government arrangement”. He said the gas deal had the effect of securing “a long-term symbiotic relationship with Venezuela”.

He said it was a pricing model and template to allow them to move forward with other fields, including the Loran Manatee, which was the first cross-border project identified between the two countries more than a decade ago.

The Loran-Manatee field contains in excess of 10 trillion cubic feet of gas with 7.3 TCF on the Venezuela side and 2.7 TCF on the Trinidad and Tobago side of the border. Khan said Maduro suggested and PM Rowley agreed “we should develop agreements for the production of Loran Manatee.”

***

Five Things About T&T, Venezuela’s Dragon Gas Deal

(Loop News, 26.Aug.2018) — On August 25, 2018, an historic agreement was made between Prime Minister Dr Keith Rowley and Venezuelan President Nicolás Maduro for access the Venezuela’s Dragon Field.

Source: PDVSA, Venezuela’s Ministry of Petroleum

Here are five things to know about the Dragon field gas deal:

  1. Dragon will produce 150 million cubic feet per day

The Dragon field, part of the Mariscal Sucre offshore gas project, is projected to produce an estimated 150 million cubic feet per day of natural gas from four wells. The Dragon Field contains approximately 2.4 trillion cubic feet of natural gas.

The Mariscal Sucre Dragon and Patao fields, located in water depths between 328-427 feet (100-130 metres), are situated nearly 25 miles north of Venezuela’s Paria peninsula in Sucre state.

It’s expected that production from Venezuela’s four fields which comprise the Mariscal Sucre project – Mejillones, Rio Caribe, Dragon and Patao – will reach 1.2 billion cubic feet per day of natural gas and 28,000 barrels per day of condensates, and will be directed primarily toward export.

  1. Gas to be transported via 30km gas pipeline

The gas will be transported to the Hibiscus platform off the north-west coast of Trinidad, just 18 kilometres from the gas field. Hibiscus is jointly owned by the T&T government and Shell.

The project involves the construction of a 30km gas pipeline – construction of pumping stations, metering systems and related facilities, the laying of gas pipelines, and the installation of safety and control systems.

In March 2017, Shell signed an agreement with NGC and PDVSA to build a 17km pipeline from the Dragon Gas Field to Hibiscus platform.

  1. PM says details ‘confidential’

Details of the deal are ‘confidential’, according to Dr Rowley, but he said the agreed-upon price was ‘competitive’.

  1. Dragon’s gas to be used for T&T products

In the first phase, the gas from the Dragon will boost the country’s gas supply for both the LNG and the petrochemical sectors. T&T plans to expand domestic gas production to 4.14 Bcf/d by the end of 2021.

  1. Dragon project to cost approximately US$100 million

The project will cost an estimated US$100 million, according to media reports. First gas from Dragon is expected in 2020.

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Aruba’s San Nicolás Refinery to Take Faja Oil

(Energy Analytics Institute, Piero Stewart, 25.Aug.2018) — Valero’s old Aruba refinery will be revitalized as an upgrader.

PDVSA announced the San Nicolás Refinery located in Aruba will be converted into an upgrader in order to process extra-heavy oil from Venezuela’s Hugo Chavez Orinoco Heavy Oil Belt, also known as the Faja.

Citgo Aruba Refinery. Source: PDVSA

The upgrader will have capacity to process 200,000 barrels per day, reported PDVSA in an official statement.

Venezuela — the country with the world’s largest oil reserves, and reeling in political, economic and humanitarian crises and suffering from the world’s highest inflation – continues to struggle to stop oil production declines. The country’s refineries and upgraders continue to suffer from a lack of investment, among other issues that continue to affect the OPEC country’s oil patch.

No further financial details related to refinery conversion were revealed by PDVSA.

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Venezuela to Send Dragón Gas to Trinidad

(Energy Analytics Institute, Piero Stewart, 25.Aug.2018) — Venezuela will send its Dragón field natural gas to Trinidad for processing.

That’s according to a deal signed today in Caracas between the governments of Trinidad and Tobago and Venezuela, reported Venezuela’s Ministry of Petroleum in a series of tweets. The countries were represented by Prime Minister Dr. Keith Rowley and President Nicolas Maduro, respectively.

The deal calls for construction, operation and maintenance of a 16-inch diameter submarine gas pipeline that will span 15 kilometers from the Dragón field in Venezuela to the Hibiscus field in Trinidad and Tobago.

Companies involved in the pipeline project include: PDVSA, National Gas Company of Trinidad and Tobago (NGC), and Shell Trinidad and Tobago Limited.

Gas from Venezuela will be used in Trinidad and Tobago to feed the twin-island country’s LNG plant and potentially other industries.

However, it’s still unclear what initial production will look like or when the pipeline will be online.

Venezuela’s National Assembly has not approved the gas agreement. However,  under Venezuela’s gas laws, no approval is needed to move forward with negotiations such as those signed today.

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Trinidad and Venezuela to Sign Gas Agreement

(CMC, 24.Aug.2018) — Prime Minister Dr Keith Rowley will lead a delegation to Venezuela tomorrow to sign an agreement for the development of the across border gas from the Venezuelan Dragon Gas Field, according to an official statement issued here.

The statement from the Office of the Prime Minister noted that the signing of the terms of the agreement will be between the National Gas Company (NGC), the Venezuelan NGC, Shell, and the Venezuelan state-owned oil and natural gas company, Petróleos de Venezuela, SA (Petroleum of Venezuela).

The agreement was originally scheduled to have been signed here on Wednesday, but the statement said the accord will be signed in caracas on Saturday.

“This was requested and acceded to due to the concerns about the earthquake,” the statement said, in reference to the 7.0 earthquake that rocked both Venezuela, Trinidad and Tobago, and other Caribbean countries on Tuesday evening.

The Dragon Field is located within Venezuela’s maritime territory, just off the north-west coast of Trinidad. It is close to the Hibiscus platform, jointly owned by the Trinidad and Tobago government and Shell.

Shell is also the operator of Dragon. The deal will hopefully see Venezuelan gas from Dragon transported to Hibiscus and then to Point Fortin, where Atlantic will turn it into liquefied natural gas.

“That’s the plan we’ve been working on for the last three months,” Rowley told reporters here in April.

Shell is also the helping the government develop and process gas from Loran-Manatee, which is off the south-east coast of Trinidad, and spans the maritime borders of Venezuela and Trinidad and Tobago.

The Loran-Manatee field has an estimated 10.25-trillion cubic feet of gas of which roughly 74 per cent belongs to Venezuela, with 26 per cent belonging to Trinidad and Tobago.

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Rosneft May Challenge Crystallex Claim To Citgo Shares

(Oilprice.com, Irina Slav, 23.Aug.2018) — Rosneft has asked a U.S. federal court to establish “a robust appraisal and sale process” of Citgo shares following Canadian miner Crystallex’ win at court against the parent company of Citgo, PDVSA, Argus Media reports citing documents submitted by Rosneft to court.

“Such a course of action is particularly appropriate under the circumstances given the multitude of parties and interests potentially affected by a sale of PdVH,” the documents said.

Crystallex was ruled the winner in a long-running case against Venezuela, which it has sued over the forced nationalization of its assets by the Hugo Chavez government. A U.S. federal judge last week awarded the miner the right to approach Venezuela’s U.S. oil unit, Citgo, to seek its compensation of US$1.4 billion.

Yet the Russian state company has priority rights over 49.9 percent in Citgo. PDVSA used the stake as collateral for a US$1.5-billion loan provided by Rosneft in 2016. The move at the time sparked a lot of negative comments in the United States, with some legislators worried that Rosneft could at some point take control over the U.S. company. The rest of the Citgo stock has been pledged as collateral to a PDVSA bond issue that matures in two years, Argus Media notes.

Now Crystallex wants to take control over the refiner, which operates a refinery network with a daily capacity of 750,000 bpd, and then sell the stock on to another investor or investors to get its US$1.4 billion. The sum was awarded to the Canadian miner as compensation for the forced nationalization of its operations in Venezuela by the Hugo Chavez government.

At the time, the Associated Press noted that the ruling by Chief Judge Leonard P. Stark is unique: government assets such as Citgo’s parent, PDVSA, are as a rule protected from lawsuits targeting a state. Yet in Stark’s ruling, the judge said that Venezuela had blurred the lines between the government and the state oil firm, with a military official at the helm of PDVSA.

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Exec Pleads in $1.2 Bln Venezuelan Money-Laundering scheme

(AP, 22.Aug.2018) — A former Swiss bank executive has pleaded guilty to his role in a $1.2 billion money-laundering scheme involving Venezuela’s state-run oil and natural gas company.

Federal court records show that 44-year-old Matthias Krull pleaded guilty in Miami federal court on Wednesday to conspiracy to commit money laundering. The German national and Panamanian resident is scheduled to be sentenced Oct. 29.

Authorities say the scheme began in 2014 with bribery and fraud at the state-run PDVSA oil and gas enterprise and grew over time. A criminal complaint contends the scheme involved members of the Venezuelan elite, money managers, brokerage firms, banks and real estate investment firms.

Krull acknowledged joining the conspiracy in 2016. Officials say Krull and others used Miami real estate and sophisticated false-investment schemes to conceal the embezzled money.

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Oil Workers Support Maduro’s Economic Plans

Venezuelan oil workers march thru the streets of Caracas. Source: PDVSA

(Energy Analytics Institute, Ian Silverman, 21.Aug.2018) — Oil workers at state oil company PDVSA marched in Caracas and across the country to show their continued support of Venezuela’s President Nicolás Maduro in the aftermath of recent economic announcements by the official.

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PDVSA to Resume Use of Caribbean Terminal Under NuStar Deal

(Reuters, 21.Aug.2018) — Venezuela’s PDVSA and NuStar Energy LP have reached an agreement over outstanding storage fees, allowing the state-run company to resume use of a key storage terminal in the Caribbean, the U.S. energy firm said on Monday.

NuStar had suspended PDVSA several times since 2017 from using its St. Eustatius facility over millions of dollars in missed payments.

The terminal played a role in a legal dispute between PDVSA and ConocoPhillips, which earlier this year tried to enforce a $2 billion arbitration award by seizing some of the Venezuelan firm’s assets in the Caribbean.

“We can confirm that we have signed an agreement with PDVSA, which brings their account current,” NuStar spokesman Chris Cho said in an email. “This agreement improves the earnings outlook for our St Eustatius terminal for the remainder of 2018.”

NuStar and PDVSA also signed a new contract that reduces the storage available to PDVSA at the facility, while securing fees for about one year’s worth of storage, he added.

In May, when Conoco started legal actions to seize PDVSA’s assets on several islands where it rents or owns terminals and refineries, over 4 million barrels of Venezuelan heavy crude stored at Statia were temporarily retained under a court order.

Conoco tried to seize the inventory, but the dispute for missing storage fees between PDVSA and NuStar added complications to the case.

In 2017, a similar legal fight between PDVSA and the conglomerate of shipping companies Sovcomflot led to an auction in which an inventory of Venezuelan crude stored in Statia was sold to a trading firm for satisfying a portion of the Russian firm’s claim.

(Reporting by Gary McWilliams in Houston and Marianna Parraga in Mexico City; Editing by Lisa Shumaker and Richard Chang)

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Venezuela’s Oil-linked Cryptocurrency Leaves Heads Spinning

(Bloomberg, Andrew Rosati & Fabiola Zerpa, 21.Aug.2018) — Beaten-down Venezuela on Tuesday began confronting a 95 percent currency devaluation and a regimen of economic controls that, after years of hunger and hyperinflation, landed like a hassle rather than a cataclysm.

Caracas returned to work after a holiday weekend that saw President Nicolas Maduro announce the devaluation and a minimum wage hike of more than 3,000 percent, decisions that were a tacit acceptance of the ubiquitous black-market exchange rate. They accompanied the roll-out of new banknotes that dropped five zeroes to recognize how inflation had made the old money virtually meaningless. Many Venezuelans waited outside banks to get their hands on the new sovereign bolivares after months of living almost cashless.

Jimmy Lugo, 39, a heavy-machine operator, said as he waited to use an ATM downtown that he was paying much as 500 percent markups for legal tender, on which he depends for bus fare. While he doubted the latest economic package would put more food on his table, he hoped it would at least bring temporary relief as the autocratic Maduro is unlikely to leave power on his own.

“This is the only ship there is. Either it floats, or we’re all going down,” Lugo said after collecting his cash.

Yet many fear the reforms will sink a foundering nation still deeper. Inflation is running over 100,000 percent, food and medicine are scarce and citizens are are fleeing by the thousands to neighboring countries. Some have been met with violence.

The Maduro regime is taking measures to quell a rising sense of panic in the nation. The minimum wage will increase more than 3,000 percent. Regulated prices for 50 staples will be announced Tuesday, and the government has begun to pay a “reconversion bonus” to help holders of the official “Fatherland” identification card make ends meet during the transition.

The sovereign bolivar’s value will be linked to a cryptocurrency — believed to be the first time a government has tried such a thing. The Petro is backed by crude oil, and the government sets its value at $60, or 3,600 sovereign bolivars. The Petro will fluctuate and be used to set prices for goods. Still, the cryptocurrency doesn’t trade on any functioning market, Francisco Rodriguez, chief economist of Torino Capital, wrote in a note to clients Monday.

Opposition politicians and unions called a strike for Tuesday, saying the devaluation would deepen suffering. Much of Caracas was working, however, with traffic flowing and many bakeries and supermarkets opened after days shuttered. Still, citizens were befuddled by the head-spinning math of the devaluation, the new currency and the very idea of a bolivar tied to the vaporous Petro.

“They’re going to pay us in cryptocurrency now — Petros? It’s crazy. I have no idea how it will work. We’re barely using bolivars at this point,” said Jose Bastida, a 58-year-old maintenance worker waiting outside a bank in central Caracas.

Maduro’s plan was “marked by inconsistencies and was short on specifics, suggesting that any attempt to stabilize the economy would start out facing huge credibility problems,” Rodriguez from Torino Capital wrote.

Private firms are “in serious risk of bankruptcy due to the way in which the measures are being implemented,” Fedecamaras, the nation’s main business chamber, said in a statement Monday. The president’s announcements foster “uncertainty, are improvised and undebated and are not being correctly communicated.”

Death Drones

Maduro’s gambit follows years of policies that turned what had once been one of Latin America’s wealthiest countries into a basket case. Pressure is mounting, with new calls for the socialist’s overthrow five years after he succeeded the late Hugo Chavez. This month, Maduro cracked down anew on his opponents after an attempt to kill him using aerial drones laden with explosives.

The announcement of the measures on a Friday night was a historical rhyme for many Venezuelans. In 1983, President Luis Herrera Campins devalued the bolivar for the first time in 22 years after oil prices crashed. Citizens called the date “Black Friday.”

Complex Calculations

Across Caracas on Tuesday, many residents said that they were already beginning to feel a rise in prices despite Maduro’s warnings to the private sector.

Marelis Martinez, a 57-year-old administrative assistant, said prices of many essentials like cheese and eggs had already gone up by as much as a third over the weekend.

“This is all a joke; I feel like I’m being laughed at,” Martinez said. “The president can say the minimum wage is worth whatever he wants, but it still won’t be enough to cover a chicken.”

To contact the reporters on this story: Andrew Rosati in Caracas at arosati3@bloomberg.net;Fabiola Zerpa in Caracas Office at fzerpa@bloomberg.net

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Stephen Merelman

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