Esmeraldas Refinery Stoppage Delayed Until March 2019

(Energy Analytics Institute, Ian Silverman, 22.Aug.2018) – A scheduled 54-day stoppage at the Esmeraldas Refinery for the maintenance of the Non-Catalytic 1 and Catalytic 1 units will be postponed until March 2019.

The stoppage, originally planned to commence on August 16, 2018, was postponed by PetroEcuador as the contractor in charge of supplying pipes for the VH1 Furnace of the Vacuum Plant has experienced procurement delays, announced Ecuador’s Hydrocarbon Ministry in a statement on its website.

***

Venezuelan Oil Assets to be Seized by Creditors

(Express, Simon Osborne, 16.Aug.2018) – Venezuela’s oil assets are being targeted by angry creditors after a US court granted a Canadian mining company permission to send in the bailiffs.

Firms owed billions by the beleaguered South American country and its state-owned oil firm PDVSA are now lining up to make sure they get a pay-out.

The Venezuelan economy is crippled by hyperinflation and the discredited regime of President Nicolás Maduro faces trade sanctions from the US, EU, Canada and Latin America’s biggest countries.

The country is essentially bankrupt and creditors see its oil assets as their best bet with the biggest target being Citgo, a Texas-based oil refiner that processes Venezuelan crude oil and is estimated to be worth roughly £3.15bn.

Oil tankers could also be targeted as US hedge fund Elliott Management did with an Argentine ship in 2012 after it won a US court ruling to collect on unpaid debts.

Venezuela, which is overdue on about £4.5bn in debt payments, is reportedly transferring oil cargoes to safe harbours including Cuba to avoid such risks.

Canadian mining company Crystallex won a key battle in its attempts to force Venezuela to pay £1.1bn in compensation for expropriation of a mining project when a US judge accepted its argument that PDVSA was an “alter ego” of the Venezuelan state and gave it the right to seize PDVSA assets in the US.

Francisco Rodriguez, chief economist of Torino Capital said the ruling could serve as a precedent.

He said: “This judgment is unambiguously negative for Venezuela, given its loss of an asset of significant value. In all likelihood the ruling will spur creditors to attempt to pursue PDVSA assets.”

ConocoPhillips has already won a £1.57bn arbitration award against PDVSA from the International Chamber of Commerce, the US oil major seized the company’s assets in the Caribbean.

The seizures left PDVSA without access to facilities that process almost a quarter of Venezuela’s oil exports.

To avoid the risk of other assets being taken, PDVSA asked its customers to load oil from its anchored vessels acting as floating storage units.

Citgo’s complicated ownership – half the company is security against more than £2.36bn of PDVSA bonds and half is collateral for a £1.18bn loan from Russian oil giant Rosneft – means any immediate plundering of its assets is extremely unlikely.

Robert Kahn, a professor at the American University and a former International Monetary Fund official, said: “The ruling is a win for Crystallex, no doubt. But I’m not convinced that it immediately marks a tipping point.”

Richard Cooper, senior partner at New York law firm Cleary Gottlieb Steen & Hamilton, said: “The Crystallex ruling doesn’t mean that every Republic of Venezuela bondholder can automatically assume that PDVSA assets are available to them.”

Venezuela also owes tens of billions of dollars to China and Russia but its sole foreign-exchange generating industry is in steep decline with oil output dropping below the 1947 levels of 1.3m barrels per day.

***

Ecopetrol Reports Higher Sales, EBITDA in 2Q:18

(Ecopetrol, 14.Aug.2018) – Ecopetrol S.A. announced the Business Group’s financial results for the second quarter and the first half of 2018, prepared in accordance with International Financial Reporting Standards applicable in Colombia.

The figures included in this report are unaudited. Financial information is expressed in billions of Colombian pesos (COP), US dollars (USD), thousands of barrels of oil equivalent per day (mboed) or tons, as noted where applicable. For presentation purposes, certain figures in this report have been rounded to the nearest decimal place.

In words of Felipe Bayón Pardo, CEO of Ecopetrol:

“During the second quarter of 2018, we saw significant operational and financial achievements for the Business Group. We posted an EBITDA margin of 51%, the highest in the business group’s history, and had the highest production of the past seven quarters, at 721,000 barrels of petroleum equivalent per day, up 2.8% from the first quarter of 2018. We were able to take advantage of the favorable environment for crude prices and at the same time confirm our technical, operational and financial capacity and our commitment to safe and environmentally responsible practices.

“Net profit in the first half of 2018 totaled 6.1 trillion pesos, with cumulative EBITDA of 15.8 trillion pesos. This achievement was possible thanks to the optimal operation of the different business segments and the financial discipline of the Group’s companies, combined with better crude prices during the period. At the close of the quarter, we succeeded in maintaining a solid cash position of 15.8 trillion pesos, even after paying out 2 trillion pesos as dividends on 2017 earnings. Risk rating agencies acknowledge our successes and have confirmed our investment-grade credit rating. Indeed, Moody’s upgraded our baseline credit assessment from ba3 to ba1.

“Our commercial strategy, announced in 2015, has succeeded in yielding tangible benefits. In the first half of 2018, we succeeded in maintaining levels close to those of the first half of 2017, even with the 35% increase in the price of Brent crude and challenging environment. For the first half of 2018, the spread on the crude sales basket was -7.7 dollars per barrel, versus -7.5 for the same period in 2017.

“Average production for the quarter totaled 721,000 barrels of oil equivalent per day, some 0.6% above the same period the previous year and 2.8% over the first quarter of 2018. We succeeded in recovering from the operational issues in the first quarter, thanks to the results of the drilling campaign in fields such as La Cira, Rubiales, Caño Sur, Dina, Quifa and Castilla. The increased activity will lead us to the path of growth and ensure meeting our annual production goal at a range of 715,000 to 725,000 barrels of petroleum equivalent per day. On the other hand, the pilot recovery programs are also advancing satisfactorily; currently 21 pilots are in operation, 16 of which are still in the expansion phase.

“In the exploratory campaign, we scored a success during the quarter by confirming the presence of dry gas and light crude at the Bufalo-1 well, in the Valle Medio del Magdalena basin. We have also completed drilling of the Coyote-2 and Coyote-3 appraisal wells, located in the Valle Medio del Magdalena, as well as Capachos Sur-2, located in the Piedemonte. These three wells are undergoing assessment to determine their commercial feasibility. We expect to drill at least 12 exploratory wells in 2018.

“As part of our Near Field Exploration strategy, in late May the Infantas Oriente field in Barrancabermeja (Santander) was declared commercial. This allowed us to incorporate in record time the reserves associated with the Infantas Oriente-1 discovery, the assessment of which was carried out at the start of the year.

“In the transport segment, I would like to note the resumption of operations on the Caño Limón – Coveñas oil pipeline in June and the stability of the transport system for heavy crudes with viscosity greater than 600 centistokes (cst – a measure of viscosity), thereby structurally reducing dilution requirements.

“The reversal strategy implemented since 2017 on the Bicentenario oil pipeline allowed for reducing the impact of the attacks and illegal valves affecting the Caño Limón – Coveñas oil pipeline, preventing deferred production in its surrounding fields. In the first half of 2018, 30 reversal cycles were completed on the Bicentenario oil pipeline.

“The Refining segment saw outstanding operational performance in the second quarter, achieving stable throughput of 374,000 barrels per day.

“In the second quarter of 2018, the Cartagena refinery continued to demonstrate the consolidation and optimization of its operations with average throughput of 153,000 barrels per day and throughput composition of 79% domestic crude and 21% imported crude, thus contributing significantly to reducing the Business Group’s cost of sales. In June, it achieved a record in the use of local crudes, at 83% of its diet. The gross refining margin for the Cartagena refinery during the quarter was USD 11.1/bl, up 44% over the same period the previous year (USD 7.7/bl), thus posting 10 consecutive months with gross margins in the double digits.

“Throughput and production at the Barrancabermeja refinery was up over 9% for the quarter versus the same quarter of 2017, thanks to the implementation of initiatives to segregate light and intermediate crudes, thus increasing their availability. The average refining margin for the quarter was USD 10.5/bl, affected primarily by the increase in the price of the crude basket versus Brent.

“In line with the Business Group’s Efficiencies strategy, in the second quarter of the year we incorporated efficiencies representing 429 billion pesos, up 17% over the second quarter of 2017. Thus, cumulative efficiencies in the first half of 2018 totaled 892 billion pesos, for a total of 8 trillion pesos since the launching of the Transformation Program in 2015.

“In addition to the above, we are particularly proud of our success in implementing operational and logistics adjustments in record time throughout the entire supply chain, in order for diesel deliveries to Medellin and its Metropolitan area to have a sulfur content of below 25 parts per million. This is in line with our commitment to the environment, thus contributing to the improvement of the city’s air quality.

“We have also committed to the massive transportation system Transmilenio S.A. to supply natural gas and B2 diesel with a maximum sulfur content of 10 parts per million for the renovation of the bus fleet of phases I and II, thus enabling the entry of EURO VI technologies.

“Together with the national and local institutions, Ecopetrol will continue to improve the quality of fuels for the whole country as set in the enhancement path established in the CONPES document for the improvement of air quality.

“In order to achieve a significant effect, it is not only necessary to improve fuels, but it is also necessary to carry out other actions such as improving the technology and age of the vehicle fleet, as well as promoting other initiatives related to road maintenance, mobility and the reduction of emissions in fixed sources, among others.

“Ecopetrol remains focused on operational excellence, value creation, a commitment to ethics and transparency, safety as a pillar of its operations and care for the environment. We are committed to profitable growth in production and reserves to deliver results that benefit the company’s sustainability and the country’s energy security.”

To review the full report please visit the following link:

https://www.ecopetrol.com.co/english/documentos/Ecopetrol%20-%20Reporte%202Q%202018%2013%2008%202018%20english%20VF.pdf

***

Mexico’s Fuel Plan Won’t Immediately Impact Texas

(Texas Tribune, Juan Luis García Hernández, 14.Aug.2018) – After a dramatic spike in gasoline prices incited widespread protests in Mexico last year, then-presidential candidate Andrés Manuel López Obrador made a promise that caught the attention of Texas officials and the state’s oil and gas industry: The veteran left-wing politician vowed, if elected, to halt the import of gasoline and diesel from the United States and other countries by 2021.

The promise — which López Obrador had previously mentioned and which he reiterated one week after winning in a historic landslide last month — was a key component of his national development platform in his third run for the presidency.

Mexican President-elect Andrés Manuel López Obrador has vowed to halt the import of gasoline and diesel from the United States and other countries by 2021.

During the race, he vowed to reverse policies pursued by his predecessor, Enrique Peña Nieto, that made the country more reliant on the international gasoline market prices. He told supporters it would result in cheaper and more dependable fuel.

“Refineries will be built, gas extraction will be promoted, and the electric industry will be strengthened,” López Obrador said in November 2016, more than a year and a half before the July 1 election. “All this to stop buying gasoline and other fuels abroad.”

Such a policy could have enormous implications for the Texas economy. The state’s refineries produce much of the gasoline and diesel imported to Mexico, where about three out of every five liters of gasoline consumed comes from the United States.

But Texas’ energy regulators, industry groups and experts downplay the potential impacts, casting doubt on López Obrador’s ability to keep his promise — at least immediately.

They say Mexico has a long way to go to wean itself off foreign fuel imports. And they also don’t see Mexico severing ties with a top trading partner.

There’s a sense that López Obrador’s promise was more political than practical, said Steve Everley, managing director of FTI Consulting. Ultimately, he said, economics — and a strong and established trade relationship — will win out.

“That doesn’t mean you don’t take it seriously,” Everley added. “You don’t look at something that’s threatening $14 billion of economic activity and just sort of whistle on past it. But I think we also need to be realistic about the interrelationship between Texas and Mexico and how valuable that is both for them and for us.”

López Obrador’s plan calls for the construction of a refinery in his home state of Tabasco in southeastern Mexico and the rehabilitation of six existing refineries to increase the amount of fuel they can produce. That would cost a combined $11.3 billion.

“It’s very optimistic,” said Texas Tech University economics professor Michael D. Noel. “I will say that in terms of Texas refineries the impact in the short term is likely to be very, very low, and the reason is that you can’t build a refinery overnight. Those things take a long time.”

Noel said Texas refineries could stand to benefit from increased Mexican energy production if it outpaces refinery construction, which may require the country to export fossil fuels to the United States for processing.

Mexico currently only meets one-third of its fuel demand domestically, said Texas Railroad Commissioner Ryan Sitton. Last year, the Mexican market consumed 797,100 barrels of gasoline per day and 365,500 barrels per day of diesel, according to data from Pemex, Mexico’s state-run oil company. Only 35 percent of that came from Mexican refineries.

The U.S. Energy Information Administration doesn’t keep track of how much of U.S. fuel exports to Mexico come from Texas refineries. However, Sitton — one of three elected officials who regulate the state’s oil and gas industry — said Texas refineries sell about 800,000 barrels of gasoline and diesel a day to Mexico, which would mean Texas provides Mexico with an overwhelming majority of its fuel.

“It’s a pretty big shot,” said Sitton. “That’s gasoline production from four or five large refineries.”

Asked a few days after the July 1 election about his ambitious three-year deadline to build a new refinery, López Obrador, who takes office Dec. 1, pointed out that India achieved a similar goal.

That country’s Jamnagar complex was able to nearly double its capacity to 1.2 million barrels per day between 2005 and 2008 by building a second refinery at a cost of $6 billion.

Experts say refinery repairs could prove to be the fastest way for López Obrador to achieve his goal.

“[Building] a refinery takes eight years to do well. A rehabilitation takes between 6 months and a year, costs much less and maybe can reach 60 percent capacity,” said Duncan Wood, director of the Mexico Institute at the Wilson Center in Washington, D.C.

Jorge Canavati, co-president of the International Affairs Committee at the San Antonio Hispanic Chamber of Commerce, said even if Mexico increases its production, market prices will ultimately dictate how much fuel it imports. “When Pemex was aggressively producing, Pemex also imported [gasoline],” he recalled.

Last year started for Mexicans with a rise in gasoline prices of 20 percent, a situation that sparked a series of protests in January.

Experts also say three years would be enough time for Texas refineries to find a new market for their products. With the lifting of a ban on most crude oil exports in 2015 and the enactment of various policies to boost natural gas exports, the United States is poised to become a top fossil fuel exporter to Asia and Europe.

Susan Grissom, chief industry analyst at American Fuel and Petrochemical Manufacturers, scoffed at the idea that the loss of the Mexican market would have a big impact on the United States.

“You know, the world adjusts,” she said.

But it would be a major hole to fill. More than half of the gasoline the United States exported in 2017 went to Mexico, according to the Energy Information Administration. And Mexico has been increasing its imports in recent years due to refining problems. Pemex, which also oversees refining in Mexico, decreased its capacity to make gasoline in the first quarter of 2018 to 220,000 barrels per day. That’s compared to 421,000 barrels per day in 2014.

Energy experts say domestic fuel production has dropped because Mexico has failed to invest in repairs to its aging refineries. Its last one was built more than 40 years ago. There are six refineries in total.

Everley said no fuel export market more sense for the United States — and Texas — than Mexico.

“The question is not whether products refined in Texas can find a market,” Everley said. “The question here is: Do we want to upset a strong trading relationship between Texas and Mexico?”

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AMLO Pledges More Than $11 Bln for Refineries

(Reuters, 13.Aug.2018) – Mexican President-elect Andres Manuel Lopez Obrador said on Monday his administration will invest more than $11 billion to boost refining capacity in order to curb growing fuel imports.

Lopez Obrador, who will take office on Dec. 1, told reporters his government plans to invest $2.6 billion to modernize existing domestic refineries owned and operated by national oil company Pemex, and spend another $8.4 billion to build a new one within three years.

The $8.4-billion figure is higher than a $6 billion estimate provided by a key energy advisor during the campaign.

Lopez Obrador, set to become Mexico’s first leftist president in decades, did not detail how the projects would be financed or whether private capital would be involved, but he has often said he will not raise taxes or grow government debt.

Mexico is among Latin America’s largest crude exporters, but is also the biggest importer of U.S. refined products. The country’s next president has pledged to lift refining capacity, which he says has declined due to corruption and neglect.

Pemex, formally known as Petroleos Mexicanos, has six domestic refineries with a total processing capacity of some 1.6 million barrels per day (bpd), but the facilities are only operating at about 40 percent of capacity so far this year. Meanwhile, gasoline and diesel imports have sky-rocketed in recent months amid planned and unplanned refinery stoppages.

Pemex has posted losses in its refining division for years but Lopez Obrador aims to boost crude processing enough to halt imports within three years.

Lopez Obrador also said he plans to invest another $4 billion to drill new onshore and shallow-water oil wells in the states of Veracruz, Tabasco and Chiapas.

Pemex production has consistently declined in recent years to fall below 2 million bpd after hitting peak output of 3.4 million bpd in 2004.

President Enrique Pena Nieto passed a reform to open up Mexico’s state-run energy industry to private producers, which has led to a series of competitive auctions that have awarded more than 100 oil exploration and production contracts.

Lopez Obrador has said he will respect those contracts as long as an ongoing review does not find signs of corruption. He is widely expected to slow down the process of offering more contracts to private players.

Reporting by Ana Isabel Martinez; Editing by James Dalgleish

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Venezuela’s Citgo Refineries At Risk Of Seizure

BOSTON, MA: People walk through the rain in front of the Citgo sign in Kenmore Square, Boston, July 18, 2016. (Photo by Timothy Tai for The Boston Globe via Getty Images)

(Forbes, Robert Rapie, 12.Aug.2018) – In 2007, following Venezuela’s expropriation of billions of dollars of assets from U.S. companies like ExxonMobil and ConocoPhillips, I suggested a potential remedy.

Since Venezuela’s state-owned oil company, PDVSA (Petróleos de Venezuela, S.A.) owns the Citgo refineries in the U.S., I felt the companies that had lost billions of dollars of assets could target these refineries for seizure as compensation.

These refineries have the same vulnerabilities as the U.S. assets in Venezuela that were seized. They represent infrastructure on the ground that can’t be removed from the country.

Citgo has three major refining complexes in the U.S. with a total refining capacity of 750,000 barrels per day. Recognizing the vulnerability from asset seizure, PDVSA tried to sell these assets in 2014, and valued them at $10 billion. But that value have been grossly overstated, considering that Venezuela subsequently pledged 49.9% of Citgo to Russian oil giant Rosneft as collateral for a $1.5 billion loan.

In recent years, PDVSA has lost a series of arbitration awards related to expropriations, and companies have been looking for opportunities to collect. In May, ConocoPhillips seized some PDVSA assets in the Caribbean to partially enforce a $2 billion arbitration award for Venezuela’s 2007 expropriation.

ConocoPhillips had sought up to $22 billion — the largest claim against PDVSA — for the broken contracts from its Hamaca and Petrozuata oil projects. The company is pursuing a separate arbitration case against Venezuela before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The ICSID has already declared Venezuela’s takeover unlawful, opening the way for another multi-billion dollar settlement award that may happen before year-end.

MORE FROM FORBES

Last week, a court ruling opened the door for Citgo assets to be seized to pay for these judgments.

Defunct Canadian gold miner Crystallex had been awarded a $1.4 billion judgment over Venezuela’s 2008 nationalization of a Crystallex gold mining operation in the country. A U.S. federal judge ruled that a creditor could seize Citgo’s assets to enforce this award.

This ruling is sure to set off a feeding frenzy among those that have won arbitration rulings against Venezuela. Until the legal rulings are settled, it’s hard to say which companies will end up with Citgo’s assets. But it’s looking far more likely it won’t be PDVSA.

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Is Venezuelan Oil Output Falling Faster Than Expected?

(OilPrice.com, Nick Cunningham, 12.Aug.2018) – The bad news from Venezuela continues.

In July, Venezuela’s oil production came in lower than PDVSA had targeted, according to Argus Media. While PDVSA had hoped that it, along with its joint venture partners, would produce as much as 1.65 million barrels per day (mb/d) in July, actual production came in at about 1.526 mb/d.

Argus says that production in the Orinoco heavy oil belt, where vast oil reserves are located, was a particular disappointment. The problem for Venezuela is that the Orinoco belt was supposed to hold up better than conventional oil production from elsewhere. The declines are a grave problem for the South American OPEC nation, and they pose an existential threat to the regime of President Nicolas Maduro, who avoided an apparent assassination attempt days ago.

But the production figure that Argus got its hands on, which came from an internal report from PDVSA, seem optimistic, even though they do point to shortfalls. After all, the June OPEC report suggested that output stood at just 1.34 mb/d – data that came from secondary sources, which includes Argus.

Against that backdrop, the 1.526 mb/d figure doesn’t seem credible. Indeed, sources from within PDVSA told Argus that officials from the company’s eastern and western divisions “systematically inflated” the data. “They play with the storage tanks and what they report is not reality,” a senior executive told Argus. In reality, production could have been as low as 1.25 mb/d.

The report is not entirely useless, however, as it does offer some clues into the company’s demise. Argus says that “scant maintenance, reservoir management, skilled labor flight and a lack of critical naptha and light crude for transport and blending” are all contributing to the steep decline in production. An estimated 1,191 wells stopped producing in July.

In a separate report from Argus, it appears that the island of Curacao is “scrambling for a lifeline to resuscitate” the century-old Isla refinery that PDVSA “has nearly abandoned,” due to the fact that ConocoPhillips moved in to seize the facility following an international arbitration decision earlier this year. Curacao says it has the capability to operate the refinery on its own, but it doesn’t have the capital nor the supply of crude oil needed as a feedstock. The refinery can theoretically produce up to 335,000 barrels per day (bpd), but in reality it can probably only produce two-thirds of that amount. For now, it is barely operational with PDVSA no longer supplying the refinery with crude oil.

From PDVSA’s standpoint, the loss of the refinery has only compounded the problems back in Venezuela since the facility was critical to blending and preparing oil for export.

The problems in Venezuela are so bad that even the Trump administration, no stranger to conflict, has decided that it does not want to kick the country while it is down. After having been on the verge of implementing sweeping sanctions – possibility targeted at Venezuela’s oil exports, or perhaps the export of diluent from the U.S. to Venezuela – the Trump administration has scrapped those plans.

In fact, the problems in Venezuela are so acute, that the attempted assassination of President Maduro barely moved the oil market, as the WSJ pointed out. That bears emphasis: There was an attempted coup in a country with the largest oil reserves in the world, a founding OPEC member and still a major oil producer, and the markets basically shrugged it off. And that is not because the oil market is oversupplied – there is a reasonable case to be made that the market could be short on supply at some point this year.

But Venezuela’s oil sector is in shambles, so oil traders are apparently already of the mind that it cannot possibly get any worse. A coup even leaves open the very remote possibility of a rebound, although, as Francisco Monaldi details, growing production by, say, 200,000 bpd per year would require a sustained effort, including investments of around $20 billion per year for a decade. Not to mention a radical change in the political context and a macroeconomic stabilization program. Needless to say, none of that appears to be in the cards anytime soon.

In any event, the coup did not succeed, so the losses are destined to continue. “The permanence of Maduro and his radical circle of collaborators is short-, medium- and long-term bullish for oil prices because the regime will fail to take the steps needed to turn production around,” Raúl Gallegos, a political analysts at Control Risks, and author of Crude Nation, told the Wall Street Journal.

Expect PDVSA to continue to miss its production targets.

***

Crystallex Cuts Others In Line for Citgo Assets

(Energy Analytics Institute, Jared Yamin, 11.Aug.2018) – Crystallex seems to have cut in line while there are many others already in line for CITGO assets and value.

What follows are comments published by Venezuelan oil analyst Francisco Monaldi in a series of tweets related to the legal battle over CITGO:

1) The value of CITGO is much higher than the claim by Crystallex, which by the way was an outrageously high amount for that expropriation,

2) This is the beginning of a shark fest of claims and lawsuits. There are many others in line for CITGO assets and value, CITGO bond holders, CITGO creditors, PDVSA 2020 bondholders, Rosneft, Conoco, other PDVSA and Venezuela creditors and ICSID claimants. It seems to me that Crystallex should not be ahead in this line,

3) In the short term this would be a blow for PDVSA making it harder to get diluents from the US and to earn cash from its heavy exports, but it is just the last in a long list of troubles including default and sanctions,

4) In the long term it would be a big blow to Venezuela, losing a strategic asset to access the USGC market in competition with Canadian heavy, particularly after Keystone is completed,

5) Outside of CITGO, Venezuela has only a few much less valuable assets, what claimants will try is to seize or disrupt PDVSA’s flows of oil and receivables, and force them to negotiate something, and

6) This is a tragic story of recklessness and incompetence by the chavismo, increasing the debt without investment, expropriating and destroying value, in the middle of an oil boom. The consequences, collapsed oil production and now the final reckoning with their claimants…

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Pemex Has or Doesn’t Have Money?

(Energy Analytics Institute, Aaron Simonsky, 1.Aug.2018) – If Mexico’s Pemex doesn’t have the necessary funds to invest in deep water or shale activities, how is it the state oil company will have funds to invests in new refineries as proposed by President-elect Andrés Manuel López Obrador?

Join the discussion below or on Reddit:

 

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Mexico Oil Output to Trend Upwards in 2027

(Energy Analytics Institute, Aaron Simonsky, 31.Jul.2018) – Mexico’s oil production will cease to decline in 2025.

That’s according to details of a report published by S&P Global Platts Energy Analyst and Consultant Manager Javier Díaz during an energy forum.

Díaz announced details of projections for Mexican crude oil production until 2040 that showed national crude production stabilizing in 2025; starting to rise in 2027, and reaching 2 million barrels per day through 2035, according to the daily newspaper El Financiero.

Reaching these goals, said Díaz, will depend to a large extent that in the “new era” the following will occur in the energy sector: foreign investment will continue to flow into Mexico, and the tendency to reverse the fall in production and continue the liberalization of the markets will also continue to improve market efficiency.

“These are the focal points that we see that can make the energy market more effective for Mexico,” said Díaz during an interview.

When questioned about the profitability of the possibility that Mexico’s President-elect Andrés Manuel López Obrador would build two new refineries and modernize the existing infrastructure, Díaz said that in the first instance a technical and financial study should be done regarding the possibility to modernize the infrastructure taking into consideration the age and conditions of the refineries.

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PetroTrin Refinery Importing Shortfall

(Energy Analytics Institute, Ian Silverman, 31.Jul.2018) – That’s according to reports in a local newspaper.

“The refinery at PetroTrin has a capacity of 140,000 barrels of oil per day (bopd); the company produces about 42,000 bopd – a shortfall of about 100,000 bopd, which must then be imported,” reported the daily newspaper Trinidad and Tobago Newsday.

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Wheatley Falls: Latest Casualty of Energy Scandal

(Jamaica Gleaner, Edmond Campbell, 31.Jul.2018) – The ongoing scandal that began at the state-owned oil refinery Petrojam has claimed its latest casualty with the resignation yesterday of Andrew Wheatley as minister of science and technology. This follows several weeks of allegations of nepotism and cronyism that triggered investigations from several state watchdog agencies.

Responding to Wheatley’s departure, two powerful groups that had previously called for him to step aside as Cabinet minister yesterday welcomed his resignation. They declared that his departure should signal the beginning, and not the end, of the establishment of systems to reduce the recurrence of corruption at agencies under his watch.

“We regard his resignation as appropriate, but belated. It should have happened some time ago. It vindicates the tradition recently established and sustained by successive administrations to have ministers either resign or tender their resignations in a context such as we have in relation to Petrojam,” Professor Trevor Munroe, head of National Integrity Action (NIA), told The Gleaner.

President of the Private Sector Organisation of Jamaica (PSOJ), Howard Mitchell, also expressed the view that Wheatley’s resignation was welcomed, albeit too late.

Mitchell said that Wheatley’s resignation would now clear the way for a proper investigation to be conducted into the agencies under the energy portfolio.

“This is not the end; it is the beginning, and it should be used as an example of a point of departure for the wider society for us to understand that we cannot build a nation, we cannot have the development that we so badly need, and the growth, without all of us living by the rules, not only the public sector,” Mitchell asserted.

He noted that the PSOJ was not picking on any political party, noting that over the years, the rules have been broken by respective administrations.

The PSOJ boss contended that the country could not achieve economic growth in the midst of corruption, adding that they were inimical to each other. On June 28, the NIA had issued a statement indicating that the principle of individual ministerial responsibility, which is part of Jamaica’s Constitution, as well as code of conduct for ministers, required that Wheatley either tender his resignation or the prime minister ask him to resign.

The NIA said that had Wheatley not resigned, this would have ruptured the tradition of individual ministerial responsibility.

In a release yesterday the People’s National Party (PNP) said it also welcomes “the long overdue removal of Dr Andrew Wheatley from the Cabinet of Jamaica”. However, it has sounded a note of caution that his resignation would not be the end of the matter.

It says the criminal investigations by the Major Organised Crime and Anti-Corruption Agency, the Financial Investigations Division, the auditor general and Integrity Commission into the activities at Petrojam and National Energy Solutions Limited must be pursued to their final conclusions “and let the chips fall where they may”.

The PNP said that the prime minister has a duty to ensure that these agencies receive the necessary resources to complete their investigations and provide their reports in a timely manner to the people of Jamaica.

***

Mexico’s Next President Promises Pemex Investment

(Bloomberg, Amy Stillman, 30.Jul.2018) – Mexico’s incoming president named a new chief executive officer for Pemex and promised government investment of 75 billion pesos ($4 billion) in the oil sector, in a bid to revive the state-owned oil company.

Andres Manuel Lopez Obrador tapped longtime political ally Octavio Romero Oropeza, who has no oil background, as the next CEO of Petroleos Mexicanos. Romero will take over when the new government comes in this December. The announcement came at an event in which the president-elect promised to boost crude output as part of a 175-billion-peso rescue plan for the industry. He said 49 billion pesos will be spent on refinery upgrades.

Romero, 59, was a government official during Lopez Obrador’s five-year term as the mayor of Mexico City from 2000 to 2005. He also shares the same birthplace as the leftist leader, the oil hub of Tabasco. Lopez Obrador has said he wants to to revitalize oil ghost towns there and build a new refinery near the port of Dos Bocas at a cost of 160 billion pesos.

For a career politician with a degree in agronomy, turning around the beleaguered oil company won’t be easy.

“It’s a political appointment for an entity whose debt represents about 14% of gross domestic product,” John Padilla, managing director of energy consultant IPD Latin America LLC, said in a phone interview. “Whether that’s going to give markets a lot of confidence at this stage, at a point when Pemex is in such a debilitated state, remains to be seen.”

Romero, who replaces Carlos Trevino, will inherit a mountain of debt — more than $100 billion — and oil production that is in free-fall. Pemex pumped 1.866 MMbbl of crude a day during the second quarter, its 13th consecutive decline compared to the same period in previous years. And even as oil prices rise, the company on Friday reported a 163-billion-peso loss, the worst quarterly result since 2016.

The company expects to average 1.9 MMbpd in the third quarter of the year and 1.95 MMbbl in the fourth quarter, Luis Ramos, deputy director of exploration and production at Pemex, said on a conference call with investors. Pemex’s proven and probable reserves have dropped by more than half since 2012, as older fields become depleted and the company fails to develop ones.

Refinery upgrades

Pemex’s refining business is in such poor condition, with aging units struggling to process less expensive heavier crudes, that it loses money if it raises output. The problem has created a reverse incentive to refine less and import more. The plants, which processed 22% less crude than last year at 704,000 bpd, operated at 43% of capacity between April and June, company data show.

Lopez Obrador, who won a landslide victory in national elections on July 1, has promised to change that. He said he will prioritize raising refinery output to full capacity in two years, and build the new refinery in Tabasco.

He also named Manuel Bartlett as head of the Federal Electricity Commission, Rocio Nahle to the post of energy minister and Alberto Montoya as deputy energy minister.

Under Lopez Obrador’s predecessor, international oil companies had recently been allowed to re-enter Mexico’s production areas after being banned for more than 70 years. The new president could suspend oil auctions and review contracts already awarded for signs of corruption. The National Hydrocarbons Commission said last week that an auction to develop seven onshore areas in partnership with Pemex will now be held on February 14, from October 31 previously. A competitive bid for over 40 onshore areas will take place the same day after being pushed back from September 27.

The company is also seeking to raise an additional $3 billion to $3.5 billion in debt before the end of the year “if market conditions are favorable,” Pemex CFO David Ruelas said on a conference call with investors. Pemex’s total debt was 2.07 trillion pesos as of June 30 an increase from 1.95 trillion pesos three months earlier.

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Hold It Right There, Petrotrin!

Source: Jamaica Observer

(The Sterling Report, Yanique Leiba-Ebanks, 29.Jul.2018) – Petroleum Company of Trinidad and Tobago Ltd (affectionately known as Petrotrin) is the state-owned oil company in Trinidad and Tobago. Its crude oilfields are located across the south-western peninsula of Trinidad, off the east coast of Trinidad, and in Point Fortin. The country’s economy primarily emphasises oil and petrochemicals, with oil contributing 40 per cent of GDP.

This is what contributed to Trinidad’s enormous wealth as measured by its Net International Reserves which stand at 9.4 months of imports (Dec. 2017) vs. 19.8 weeks for Jamaica (June 2018).

This also led to the country having “A” rated debt as compared to single “B” for Jamaica.

All this changed when oil prices started to decline and their debt was downgraded to BBB+ which is still investment grade, but after further deterioration of the economy, S&P moved its outlook to negative in April.

WHY DO WE CARE ABOUT PETROTRIN?

Petrotrin issued a US$850-million bond that matures in August 2019. While the company has issued other bonds, this was the most attractive to investors. The bond is/was one of the most popular bonds in the market.

The reasons were simple: firstly, everyone in Jamaica was familiar with Trinidad, secondly, the bond has a very short maturity — it matures in 2019, and thirdly, the coupon rate is fixed at 9.75 per cent.

In many ways it was a no-brainer, and given the importance of oil to Trinidad, it was assumed that it was implicitly guaranteed by the Government.

SO WHAT WENT WRONG?

Investors became jittery when the financials showed that the company recorded a massive loss of TT$2.2 billion in 2017. According to a Moody’s report, the cash flow (as at September 2017) was woefully inadequate for repaying the debt maturing in 2019.

The updated figure shown in the financials as at June 2018 shows approximately US$200 million of cash against total debt of US$1.728 billion and a current ratio that is much less than one.

Furthermore, it was announced that Petrotrin was going to split operations and reorganise in February 2018. This was against the backdrop of a deteriorating economy in Trinidad where real GDP growth contracted by 6.0 per cent in 2016 and 2.6 per cent in 2017.

Real GDP growth (Annual percent change) 2014 2015 2016 2017 2018

Trinidad and Tobago -0.3% 1.5% -6.0% -2.6% 0.2%

Source:IMF

LATEST DEVELOPMENTS

  • Petrotrin has recorded an after-tax profit of TT$85.6 million for the quarter ended June 30, 2018. This compared to a loss of TT$517.5 million in the previous quarter.
  • Petrotrin was given the green light to terminate contract with A&V Oil amidst a scandal where the company paid $100 million to A&V Drilling, for oil which was not supplied. In addition, findings showed that the reservoir was incapable of producing the volumes in question.
  • IMF stated that oil output is improving due to exploration and refinery upgrades by Petrotrin. It added that Trinidad & Tobago’s growth may be flat or somewhat negative this year but the economy “may be starting to turn a corner as a result of a projected recovery” in the energy sector.
  • Local and global banks are already in talks with Petrotrin about restructuring the bonds and general liability management.

As a result investors are concerned about the refinancing options available to Petrotrin, especially in light of a recent announcement that the Government will not be guaranteeing any new debt and low cash flows. However, as listed under the latest developments, talks are underway regarding the restructuring of the bonds.

In addition, Petrotrin is a significant contributor to Trinidad and Tobago’s GDP and as such, it would be financial suicide to let it fail, but if you hold this bond, keep a track of the developments and act accordingly.

Yanique Leiba-Ebanks, CFA, FRM is the AVP, Pensions & Portfolio Investments at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at: info@sterlingasset.net.jm

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U.S. Revokes Visa of Citgo CEO

Asdrubal Chavez Source: Bloomberg

(Bloomberg, Lucia Kassai and Fabiola Zerpa, 18.Jul.2018) – Being a blood relative of Hugo Chavez used to open doors. Now Asdrubal Chavez, cousin of the late Venezuelan socialist leader, is finding out it can close some as well.

In the most recent blow against Venezuela, the U.S. revoked the visa of Chavez, chief executive officer of Petroleos de Venezuela SA’s U.S. refining unit Citgo Petroleum Corp. and a former oil minister. He will be burdened with the task of commanding from outside the U.S. three refineries with a combined capacity to process 749,000 barrels of oil daily and an army of 3,500 employees.

Venezuela, home to the world’s largest oil reserves, has seen its production slide by more than one-third since late 2015, according to data compiled by Bloomberg. Its output may sink from 1.34 million barrels a day in June to just over 1 million, Torino Capital chief economist Francisco Rodriguez wrote in a note. U.S. sanctions have accelerated the decline, as have lawsuits by ConocoPhillips to claim assets as payment for an arbitration award.

The U.S. has sanctioned at least 48 Venezuelan nationals associated with economic mismanagement and corruption, including President Nicolas Maduro, and has provisionally revoked tens of thousands of visas in the aftermath of President Donald Trump’s travel ban. Still, kicking out a C-suite executive of the country is rare.

The revocation “does not change anything at Citgo in terms of its management and operations,” the company said in an emailed statement.

The State Department declined to comment on individual visa cases.

It’s unclear to where Chavez, who used to work from Citgo’s headquarters in Houston, will move. One of the possibilities would be for him to be based out of Aruba, where Citgo is seeking to refurbish a refinery and convert it into an oil upgrader that will transform extra-heavy Venezuelan oil into refinery-ready synthetic grades.

— With assistance by Nick Wadhams
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Machado Says Venezuela “Show Can’t Go On”

(Energy Analytics Institute, Piero Stewart, 13.Jul.2018) – Opposition leader María Corina Machado said the “show can’t go on” during a video broadcast from Punto Fijo.

The leader’s video in reaction to a recent oil spill at PDVSA that the state oil company blamed on workers.

“A criminal regime that transformed PDVSA from one of the companies with the best industrial safety indices into one of the most dangerous in the world, now pretends to blame the workers for this new spill,” wrote Machado in an official Twitter post. “It’s monstrous. My support for oil workers. Resist!,” she added.

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CNH Says Mexico Must Reduce Oil Dependence

(Energy Analytics Institute, Ian Silverman, 13.Jul.2018) – Mexico must reduce its dependence on the United States in regards energy issues.

The country can achieve this goal by increasing its refining capacity, reported the daily newspaper La Jornada, citing National Hydrocarbons Commission (CNH by its Spanish acronym) President Juan Carlos Zepeda. The official added that the next administration has a good possibility to fulfill the objective of assisting Mexico gain greater energy autonomy.

Zepada agreed that construction of a new refinery to assist reduce gasoline imports – which currently represent 75% of demand in Mexico and come entirely from the U.S. – would assist Mexico in terms of gaining energy autonomy.

The official also said strategies should be sought to stop importing 85% of the natural gas used by Mexico, and which at the moment also comes in great part from the U.S.

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Mexican Refineries a Must for “Energy Security”

(Energy Analytics Institute, Jared Yamin, 10.Jul.2018) – Given Mexico’s dependence on imported fuel, construction of two new refineries in the country “isn’t a business issue, it’s for energy security,” said researcher and hydrocarbons analyst Fluvio Ruiz Alarcón.

Just as recently as May 2018, Mexico imported 520,000 barrels per day of gasoline, which represented 65% national consumption during that month, reported the daily newspaper El Financiero, citing the analyst who referred to figures from state oil company Pemex.

In terms of whether it was better to reconfigure Mexico’s six existing refining complexes instead of building new ones, Ruiz Alarcón explained: “reconfiguration is basically building a refinery; just look at how long it took the projects that we’ve already done. They took years, ” added the adviser to the team of Mexico’s President Elect Andrés Manuel López Obrador (AMLO).

Ruiz said the first parts of the new president’s National Project consist of recovering the Bicentenario Refinery, a failed project of the Presidency of Felipe Calderón’s that was planned for construction in Tula, Hidalgo. The estimated construction cost of the refinery could range between $10 to $12 billion, depending on the type and size of the of refinery, he said.

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Petrobras, CNPC to Finish Rio Refinery

(Efe, 4.Jul.2018) – Brazilian state oil company Petrobras and China’s state-owned China National Petroleum Corporation signed a letter of intent to conclude construction of a refinery in Rio de Janeiro, the South American company said.

Work on the refinery, known as the Rio de Janeiro Petrochemical Complex (Comperj), has been stalled since 2015 due to the sprawling Car Wash probe, initially focused on a massive bribes-for-inflated contracts scandal centered on Petrobras

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Venezuela’s Declining Crude Exports Squeeze India’s Refiners

(Reuters, Marianna Parraga, 3.Jul.2018) – Venezuela’s crude shipments to India, its third largest export market, fell 21 percent in the first half of the year, according to internal documents from state-run PDVSA, adding to supply troubles for Indian refiners as they are increasingly pressed to diversify oil imports.

Venezuela’s production decline to a 30-year low and export woes stemming from mismanagement, lack of investment and payment delays are affecting almost all of the OPEC-nation’s customers.

But the impact on India is notable and comes as its refiners are now preparing for a “drastic reduction to zero” of oil imports from U.S.-sanctioned Iran.

Last week, PDVSA officials met with executives from India’s Reliance Industries and Russia’s Rosneft, which owns a majority stake in India-based Nayara Energy, to discuss trade issues, the state-run company said.

The talks focused on how to remedy export delays, according to a person familiar with the matter.

Venezuela sent almost 280,000 barrels per day (bpd) of heavy crude to India in the first half of the year, a 21 percent drop versus the 355,500 bpd shipped in the same period of 2017, according to PDVSA trade documents.

The decline is the second steepest after the United States, which has suffered a drop of about 30 percent in crude imports from Venezuela this year, the documents seen by Reuters show.

If crude supplies from Iran and Venezuela, two of India’s top five oil suppliers, cannot be secured in coming months, some of the nation’s refiners would have to rely almost entirely on sourcing the heavy barrels they need from Iraq, according to analysts.

“Indian refiners are very worried about supply from Iran, but also from Venezuela,” said Robert Campbell from consultancy Energy Aspects.

Saudi Arabia is expected to boost supply to India in the short term, but those barrels would not match the quality of the missing Venezuelan crude, he added. “The lack of heavy barrels is not a problem only in the Atlantic Basin but in Asia as well,” he added.

PDVSA and Nayara did not reply to requests for comment. India’s Reliance declined to comment.

India is the world’s fourth largest refiner after the United States, China and Russia. While Chinese and Russian firms resell a large portion of the Venezuelan crude and fuel they receive to monetize oil-for-loan agreements, Indian refiners need the barrels they get through crude supply contracts with PDVSA.

FEWER BARRELS FOR EVERYBODY

Venezuela’s crude output is declining faster than expected amid insufficient investment, attempts to seize its overseas assets over payment disputes and skilled workers leaving its oil industry due to low salaries and an extended corruption probe within PDVSA.

The country’s oil production averaged 1.58 million bpd in the first five months of 2018, according to figures reported to OPEC, its lowest annual level since 1985. The fall, which is putting pressure on global supply and contributing to growing oil prices, has also taken a toll on exports.

PDVSA last month requested customers not send tankers to its main port of Jose to alleviate congestion. But vessels have continued arriving mainly for Chinese, Indian and U.S. clients, according to Thomson Reuters vessel tracking data.

The tanker bottleneck has worsened since May, when ConocoPhillips started legal actions to seize PDVSA’s assets to satisfy a $2-billion arbitration award, blocking the state-run firm from using its Caribbean terminals.

In June, PDVSA shipped to India 268,300 bpd after servicing some vessels that had waited for up to a month to load. The Venezuelan firm plans to deliver some 240,000 bpd in July, according to Reuters and PDVSA data.

The unstable crude supply from Venezuela to India in recent months has mainly benefited Iraq, India’s largest crude source, and United Arab Emirates, which in May replaced Venezuela as India’s fourth biggest crude supplier.

Reporting by Marianna Parraga in Houston, additional reporting by Promit Mukherjee in Mumbai; Editing by Tom Brown and Marguerita Choy

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US$1.4B Deal to Restart St Croix Refinery

(Stabroek News, 3.Jun.2018) – U.S. Virgin Islands Governor Kenneth E. Mapp announced yesterday an agreement which would reopen one of the world’s largest refineries, create hundreds of jobs in the territory and buttress the solvency of the Government Employees Retirement System (GERS).

According to a release from his office, Mapp said the US$1.4 billion pact was between the Government of the Virgin Islands and ArcLight Capital Partners, LLC, the owners of what had been one of the largest oil refineries in the world when it was shut down on the USVI island of St Croix in 2012. The release said that the deal includes reopening the refinery portion of the operation, which when restarted, will funnel hundreds of millions of dollars into the local economy.

The release said that under the agreement with ArcLight Capital, the owners of what is now called Limetree Bay Terminals, the company will invest approximately US$1.4 billion to upgrade the existing refinery located in St. Croix. Over the next 18 months, this will create more than 1,200 local construction jobs.

Once refinery operations begin at the end of 2019, as many as 700 permanent jobs will be created. The new jobs will be in addition to the over 750 jobs now at the terminal storage facility. The initial refining operations provide for the processing of around 200,000 barrels of crude oil feedstock per day.

“This agreement is great news for the people of the Virgin Islands as we continue to grow and expand our economy,” said Mapp, who added it is tremendous news for the ‘big island,’ which felt the full brunt of the shutdown of refining operations in 2012.  He added that the capital investment will not only benefit St. Croix since the monies from the agreement will boost the solvency of GERS and will also help fund a new 110-room, “upscale lifestyle” hotel, flagged by a major four-star brand on the sister island of St. Thomas.

Upon the closing of the transaction, ArcLight Capital will make a US$70 million closing payment to the Government of the Virgin Islands. The payment includes US$30 million for the purchase from the government of approximately 225 acres of land and 122 homes. The release said this property was acquired as part of the government’s settlement of certain claims against HOVIC, PDVSA of Venezuela, Hovensa and Hess Oil Corporation.

Once refinery operations begin and after crediting the US$40 million of prepaid taxes, Limetree will make annual payments to the government in lieu of taxes at a base rate of US$22.5 million a year. With market adjustments based on the refinery’s performance, this could increase to as much as US$70 million per year, but will not fall below US$14 million a year, the release said.

The release said that according to industry experts and consultants Gaffney, Cline & Associates, the government expects to receive more than US$600 million over the first 10 years of the restart of the refining operations. This income is in addition to the US$11.5 million currently flowing to the government from the oil storage terminal each year.

“For comparison sake, in the over 30 years that Hess Oil operated the refinery on the island of St. Croix, the company paid approximately US$330 million in corporate taxes to the government. As you may recall, in 2015 Hess Oil filed suit for the return of (those tax payments),” Mapp pointed out in the release. Hess Oil is one of the partners of ExxonMobil’s subsidiary, Esso in the Stabroek Block in Guyana’s waters.

Mapp said: “This landmark agreement did not happen overnight. It is the result of much hard work by the owners of ArcLight Capital and my Administration over the past two years. It is the product of complex negotiations with major players in the global oil industry. It required tremendous work with the Trump Administration and the President’s Council of Environmental Quality, the EPA (United States Environmental Protection Agency) and the U.S. Department of Justice. More work remains to be done, but this agreement allows the Virgin Islands to accelerate its recovery, grow its economy, create jobs for its people, propel new startup businesses, as well as support existing businesses and ultimately provide revenues for our government and our retirement system,” he said.

The release added that qualified Virgin Islands residents will be given preference in all hiring. ArcLight Capital will be obligated, and the local government will assist, to advertise and publicize all job opportunities for local residents. Residents of St. Thomas and St. John, who may be interested in working during the reconstruction of the refinery, will be offered a place to live while working on St. Croix without charge, the release added.

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Citgo Appoints Aruba Refinery Executives

(Reuters, 28.Jun.2018) – Citgo Petroleum, the U.S. refining arm of Venezuela’s state-run oil company PDVSA, said it appointed two senior executives to new positions as it works to refurbish an idled Aruba refinery.

Luis Marquez was named vice president and general manager at the refinery, a 235,000-barrel-per-day plant in San Nicholas that has been awaiting an overhaul. Edward Oduber also was appointed interim on-site project manager for the refurbishment of the refinery, during Phase II of the project, the company said.

Citgo in 2016 signed an up to 25-year lease with the government of Aruba to refurbish and operate the plant as part of a $685 million project. Earlier this year, it had slowed work on the overhaul due to a lack of credit.

Marquez, who replaced interim general manager Raymond Buckley, began his career in 1981 at the Amuay Refinery in Venezuela and has held positions at PDVSA International Refining, PDVSA Argentina, PDVSA Ecuador, and Petrocedeño, the company said.

Edward began at the San Nicolas refinery in Aruba in 1990, and held positions with Citgo Aruba, Valero Aruba, and Coastal Aruba.

Citgo said that Joe Crawford Jr will continue as general manager maintenance and operations overseeing the operating portions of the facility along with the loading facilities, terminal and distribution network. (Reporting by Gary McWilliams; Editing by Amrutha Gayathri)

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PDVSA’s Amuay Halts Cat Cracker

(Reuters, 27.Jun.2018) – Venezuela’s 645,000 barrel-per-day (bpd) Amuay refinery has halted its catalytic cracking unit and its distillation unit No. 5, a refinery worker and a union leader said on Wednesday, while state oil company PDVSA said the units were operational.

The cat cracker was halted on Saturday while the distillation unit was taken off line on Tuesday, said union leader Ivan Freites.

“There’s not enough steam to keep that plant in operation,” he said about the distillation unit.

“The cracking and distillation units are operational,” PDVSA said in a response to a message sent by Reuters.

A refinery worker, who asked not to be identified, said problems with steam compression and electricity generation had forced the cat cracker offline, adding that one of the two distillation units in service may soon suffer the same problems.

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EIA Publishes Updated Venezuela Country Report

(EIA, 21.Jun.2018) – Venezuela holds the largest oil reserves in the world, in large part because of the heavy oil reserves in the Orinoco Oil Basin. In addition to oil reserves, Venezuela has sizeable natural gas reserves, although the development of natural gas lags significantly behind that of oil, reported the US-based Energy Information Administration (EIA) in its updated Venezuela country report posted online. However, in the wake of political and economic instability in the country, crude oil production has dramatically decreased, reaching a multi-decades low in mid-2018.

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Pemex Lets Contract for Tula Refinery

(Oil and Gas Journal, Robert Brelsford, 11.Jun.2018) – Mexico’s Petroleos Mexicanos (Pemex), through its processing subsidiary Pemex Transformacion Industrial (formerly Pemex Refinacion), has let a contract to a partnership of Saipem SPA and Mexican subsidiary Saimexicana SA de CV for works to be carried out on the heavy oil (H-Oil) plant at Pemex’s 215,100-b/d Miguel Hidalgo refinery in Tula, Hidalgo state.

As part of the contract—valued at $39.23 million—Saipem will perform rehabilitation and commissioning works at the H-Oil plant, which currently processes amounts of pure diesel and produces hydrodesulfurized diesel with low sulfur content that are sent in bulk to the catalytic plants, as well as obtaining other products, like diesel, sour gas, dry gas, and acid, Pemex said.

The proposed rehabilitation project will upgrade the H-Oil plant to increase production of ultralow-sulfur gasoline in compliance with environmental regulations and expand handling of crude oil for production of other fuels, such as diesel and jet fuel, the operator said.

Upon launch of the tender seeking bids for the project in March, Carlos Trevino Medina, Pemex’s chief executive officer, said he expected the rehabilitated H-Oil plant to be completed by yearend.

Broader transformation

The H-Oil rehabilitation project comes amid the ongoing reconfiguration of the Tula refinery Pemex began in 2014 (OGJ Online, Nov. 18, 2015).

First announced in 2013, the two-phased Tula refinery reconfiguration project is intended to generally modernize crude oil processing, increase efficiency with which vacuum residue is converted into high-value fuels, expand production of higher-value products, increase refining margins, and reduce fuel-oil handling problems at the site, Pemex said in its latest annual report.

While Phase 1 of the project was about 27% completed by yearend 2016, certain works were delayed and rescheduled—including construction of an 86,000-b/d delayed coking plant and associated installations necessary for its operation—due to budgetary constraints.

As of Mar. 31, construction of the coker plant was 60% completed, and Pemex currently is evaluating funding alternatives through alliances and strategic partnerships to complete construction, the operator said.

With Phase 1 of Tula’s reconfiguration now scheduled to be completed by 2020, Phase 2 of the project—which covers construction of additional processing installations as well as modernization and integration of existing units—is slated for completion in 2022, Pemex said.

Once completed, Pemex said it expects modernization of the Tula refinery will enable the site to increase production of refined products to 220,000 b/d from 154,000 b/d, increasing the refinery’s overall performance by more than 40%.

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Brazil Oil Workers Strike, Defying Court Order

(Efe, 30.May.2018) – Brazilian oil workers defied a court order on Wednesday by launching a three-day strike affecting oil refineries.

The FUP, a federation that assembles most of Brazil’s oil workers’ unions, said in a statement that the top labor court’s decision to declare the strike illegal had not “intimidated” workers.

On Tuesday, a judge declared the strike illegal because it would be “abusive” and be “carried out to disturb” the population, threatening to impose a 500,000-real fine ($135,000) in case the strike broke out.

The oil workers strike was organized to support striking truckers, who have been calling on state oil company Petrobras to lower fuel prices, which have sharply increased due to a rise in international crude prices and to the slide in the value of the Brazilian real.

The strike, according to the FUP, was also organized to demand the resignation of Petrobras CEO Pedro Parente and to denounce a purported plan by the right-wing government to sell company assets to multinational corporations.

The oil workers’ unions said that the 72-hour work stoppage was a “warning” and that an open-ended strike could ensue if their demands were not met.

The FUP, however, said that the strike would not lead to a lack of fuel in the country, at a time when the truck driver’s strike, which is now in its 10th day, has caused a shortage of basic goods such as gasoline and some foodstuffs.

On Sunday, the Brazilian government and truckers’ unions reached an agreement to put an end to the strike, although hundreds of truck drivers have continued to block dozens of roads to demand that the government provide more guarantees that it will lower diesel prices.
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PDVSA’s Deterioration on All Fronts

(Energy Analytics Institute, Pietro D. Pitts, 22.May.2017) – In recent weeks PDVSA has reported at least three accidents: Petrotrin oil spill in Sucre state and incidents at its Cardon and Curaçao refineries.

The writing on the wall continues to point to a cash-strapped state oil company with an inability to make investments, retain top talent, organically grow oil production, and let alone take on the leadership role in Venezuela’s upstream, downstream, or midstream sectors. The stand-alone events at PDVSA’s Cardon and Curaçao refineries demonstrate conditions at the company’s refineries continue to deteriorate as expected due to a lack of investments, upgrades and maintenance by the state oil entity.

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PDVSA Halts Cardon Catalytic Unit

(Energy Analytics Institute, Ian Silverman, 16.May.2017) – PDVSA halted the catalytic cracking unit at the 310,000 barrel-per-day Cardón refinery in Punto Fijo, reported Reuters, citing a worker at the plant and a union official. It is unclear when the unit will be back online.

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PLC Refinery Conversion to Conclude in 2018

(Energy Analytics Institute, Piero Stewart, 17.Feb.2017) – PDVSA estimates that the deep conversion project at its 100 percent owned Puerto La Cruz refinery, which will require foreign investments of $10.5 billion and allow the refinery to process 210,000 barrels per day, will conclude in late 2018.

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Maduro Names Citgo President as Venezuela’s Oil Minister

(Energy Analytics Institute, Aaron Simonsky, 20.Jan.2017) – Venezuela President Nicolas Maduro announced the appointment of Nelson Martínez, the actual president of Citgo Petroleum Corporation, as the country’s new petroleum minister. Martínez replaces outgoing Petroleum Minister Eulogio Del Pino.

“Our friend Eulogio Del Pino remains in front of PDVSA,” reported state oil company PDVSA in an official Twitter post, citing Maduro. PDVSA, as the Caracas-based company is known, also reported Maduro as saying they “we’re going to restructure the industry,” without providing details and referring to the troubled oil sector of the member country to the Organization of Petroleum Exporting Countries (OPEC).

Houston-based Citgo is capable of refining 749,000 barrels per day of crude at refineries in the United States of America located in Texas, Illinois and Louisiana. Citgo markets more than 600 different types of lubricants and sells motor fuels through more than 5,300 independently owned, branded retail outlets, according to data on the company’s website.

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EP PetroEcuador Lays Out Goals for 2016

(Energy Analytics Institute, 27.Jun.2016, Clifford Fingers III) – EP PetroEcuador revealed some of its goals for 2016, reported the state company in an official statement.

The goals for 2016 include, but are not limited to the following:

— Operation of product pipeline Pascuales Cuenca,

— Company restructuring,

— Construction of new building for EP PetroEcuador in the city of Guayaquil,

— Civil-mechanical remediation at the Gas de Bajo Alto Plant,

— Modernization of coastal oil and product pipelines,

— 100 percent operation of the Esmeraldas refinery (Editor’s note: goal achieved in 2015),

— Implementation of KBC best practices,

— Overhaul of the La Libertad refinery,

— Environmental overhaul of 76,000 cubic meters of soil,

— Laboratory certifications ISO 17025,

— Social compensation programs,

— Environmental auditing processes,

— Improvement in the quality of fuels,

— Optimization of the new Monteverde terminal (sanitary and chemicals),

— Remodeling and certification of all service stations,

— Port facilities – entrance of 40,000 metric-ton ship in Tres Bocas,

— Supply of ECOPAIS gasoline in more regions of the country (Machala, Los Ríos and Azuay), and

— Construction of the portable water projects.

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Three Companies Interested in Esmeraldas Overhaul

(Energy Analytics Institute, 16.Jun.2016, Clifford Fingers III) – Three companies, Adelca, Novacero and Practipower, presented their bids to buy an estimated 6,500 tons of salvage left over from the Esmeraldas Refinery overhaul.

A total of 29 companies from Ecuador were qualified to present bids for salvage from the Esmeraldas Refinery such as electronic equipment, furnaces, bulbs, reactors and other pieces that were replaced during the recent overhaul of the refinery, reported EP PetroEcuador in an official statement on its website.

The bids will be analyzed and a winner will be announced within 48 hours, said Omar Quijano, an EP PetroEcuador executive with the law division within the state oil company.

***

CITGO, Aruba Gov’t Finalize San Nicolas Refinery Deal

(Energy Analytics Institute, Pietro D. Pitts, 11.Jun.2016) – Authorities from the governments of Aruba, the Bolivarian Republic of Venezuela, and officials from Venezuela’s state oil company Petróleos de Venezuela, S.A. (PDVSA) and CITGO Aruba, gathered in Caracas, Venezuela to take part in the execution of a commercial agreement between CITGO Aruba and the Aruban government to reopen a 209,000 barrel per day refinery located in San Nicolas, Aruba.

Officials in attendance at the gathering included: Venezuela’s President Nicolás Maduro, Venezuela’s Oil Minister Eulogio del Pino, Aruba’s Primer Minister Mike Eman; Aruba’s Economy, Communication, Energy and Environment Minister Mike de Meza, and CITGO Petroleum Corporation President and CEO Nelson P. Martínez, reported CITGO in an official statement on its website.

Following several months of negotiations, officials from the Aruban government and CITGO Aruba, announced plans to reactivate operations — which had been idled since 2012 — through a refining facilities 15-year lease agreement, with a 10-year extension option. CITGO Aruba, a group of operating companies under PDV Holding (a PDVSA subsidiary), will operate the facility with CITGO providing services to the group.

“This project will transform the refinery into an upgrader for Venezuelan extra-heavy crude within 18 months to two years. This process — which will require an investment ranging from $450 million to $650 million, to be obtained from external financing sources — can be compared to a large turnaround. This is an area in which CITGO is well positioned to provide technical expertise and services,” Martínez said, adding that with these changes, the refinery would become a successful economic venture for all parties.

“This has been a very well thought-out process which involved the participation of the best available technical consultants from CITGO and PDVSA, as well as the input of several leading international refining industry consulting firms, such as KBC Advanced Technologies, KBR of Venezuela and Aruba continue to evaluate the possible construction of a natural gas pipeline that would link the two countries which are just 17 miles apart …

Germany and others that assessed the project’s technical and financial viability,” Martínez added.

Once the adaptation process has concluded, the facility will upgrade extra-heavy crude from the Venezuela’s Orinoco Heavy Oil Belt or Faja, transforming it into intermediate crude, which in turn will be sent on to the CITGO refining network in the United States of America for further processing, Martínez explained. At the same time, naphtha will be sold to PDVSA for use as diluent for its extra-heavy crude.

A complementary project under consideration would allow the utilization of excess natural gas available in the Paraguaná region of Venezuela. Besides the significant energy cost savings in operations that this would generate, using natural gas would substantially reduce refinery emissions and contribute to environmental protection efforts in the region, the CITGO CEO said, adding that the construction of a gas pipeline linking the coasts of Venezuela and Aruba, which are just 17 miles apart, is being evaluated towards this end.

“This is a very strong project from both the technical and financial perspective. It is a strategic partnership that will benefit CITGO Aruba, PDVSA, Venezuela and Aruba through operations that reduce costs in terms of transportation, energy and storage needs, fully utilize existing infrastructure and maximize the benefit of extra-heavy crude oil production from the Orinoco Oil Belt, the largest oil reservoir in the world,” Martínez concluded.

***

Esmeraldas Overhaul to Reduce Imports by Nearly $355 Mln

(Energy Analytics Institute, 8.Jun.2016, Clifford Fingers III) – Ecuador will benefit financial from the recently completed overhaul of the Esmeraldas refinery.

The country will save more than an estimated $1 million per day due to the decrease in fuel and derivative imports which will translate into an annual savings of around $355 million, reported EP PetroEcuador in an official statement on its website, citing company General Manager Pedro Merizalde Pavón.

“The refinery is now operating at 100 percent of its capacity,” said EP PetroEcuador Refining Manager Diego Tapia.

Overhaul Summary

The overhaul of the refinery required an investment of $1.2 billion and allowed EP PetroEcuador to recuperate the mechanical integrity of the plant and return to its 110,000 barrel-per-day operating capacity.

An estimated 7,000 workers participated in overhaul activities, of which 6,400 were local hires.

The overhaul will translate into an annual savings of nearly $355 million due to the reduction of fuel and petroleum derivative imports.

As part of the overhaul, close to 5,300 tons of toxic waste was also shipped outside of Ecuador for proper treatment. Additionally, $137 million was invested in social projects especially in the area of education, health, sanitation, as well as road related activities.

***

Company Profile: Oleoducto Central S.A. (Ocensa)

(Moody’s, 4.Jun.2016) – Oleoducto Central S.A. (Ocensa) is the largest crude oil pipeline and the only public-use pipeline in Colombia. Its pipeline is ~845 km in length with 745,000 b/d of capacity starting in mid-2016. Ocensa connects the country’s largest crude producing fields in the Llanos Basin at El Porvenir to export facilities at Covenas on the Caribbean coast.

The company is owned 72.65 percent by Ecopetrol through its wholly-owned midstream subsidiary, Cenit SAS. The remaining stakes are owned 22.35 percent by Advent International and 5 percent by Darby Overseas (a subsidiary of Franklin Templeton), both private equity firms. Advent purchased its stake in December 2013 from long-time owner/shippers Total SA, Repsol Oil & Gas Canada Inc. formerly Talisman Energy Inc., and CEPSA, a Spanish refining subsidiary of IPIC, an investment fund of the government of Abu Dhabi.

***

Colombia Needs Investments of $7 Bln

(Energy Analytics Institute, Jared Yamin, 1.Jun.2016) – Colombia needs to invest an estimated $7 billion per year over a ten-year period or under to remain self-sufficient in the production of petroleum.

The outlook for Colombia’s petroleum sector in terms of self-sufficient is ‘reserved,’ reported the daily newspaper El Tiempo, citing Colombia’s Petroleum Association (ACP by its Spanish acronym) President Francisco José Lloreda.

Expected investments of $3.82 billion on exploration and production activities may not materialize, announced the official, adding that no seismic has been shot in 2016.

“If the tendency does not change, by the year 2022 production could fall below an average of 400,000 barrels per day,” said Lloreda. “This would be when that it would be necessary to import crude for the Cartagena and Barrancabermeja refineries.”

We require a competitive fiscal regime, said Lloreda, referring to what is needed to attract investments.

***

Ecuador Seeks Foreign Investors for Pacific Refinery

(Energy Analytics Institute, 1.Jun.2016, Clifford Fingers III) – Ecuador’s President Rafael Correa named Horacio Yépez Maldonado as the country’s new ambassador to seek financing for the Pacific Refinery with the assistance of foreign investors.

Correa signed Decree 1063 on May 31, 2016 which stipulated that Maldonado seek financing for the project from potential investors in China, South Korea, India, European countries and others suggested by the country’s Foreign Relations Minister, reported the daily El Universo.

***

El Aromo Area Considered Seismic Zone

(Energy Analytics Institute, 30.May.2016, Clifford Fingers III) – The El Aromo area, where the Pacific Refinery will be located, near Manta in Manabí is considered a seismic zone by Seismologist and Volcanologist Hugo Yepes.

“This is a seismic zone with a history as noted and demonstrated with a large earthquake in 1906,” reported the daily newspaper El Diario, citing the specialist. “The areas around the El Aromo could encounter important seismic activities,” Yepes said without providing details.

***

La Libertad Refinery Fire Controlled With No Injuries

(Energy Analytics Institute, 11.May.2016, Clifford Fingers III) – A fire at the Parson plant of the La Libertad refinery, located in the Santa Elena province, was controlled within five minutes.

The fire was caused by a leak at a cargo pump which caught fire when it contacted a hot surface, reported EP PetroEcuador in an official statement on its website.

Operations at the Universal plant were suspended as part of preventative measures, according to the state oil company.

***

Moody’s Confirms Ecopetrol Investment Rating

(Ecopetrol S.A. 10.May.206) – Ecopetrol S.A. announced that Moody’s Investors Service has maintained Ecopetrol’s credit rating at Baa3.

This confirmation means that the company will retain its investment grade rating, which had been assigned to it by Moody’s on January 18, 2016, and concludes the ratings review initiated on January 16, 2016.

In its report, Moody’s highlighted the company’s adjustment to its investment plan to protect its liquidity, the increase in refining capacity due to the start-up of the Cartagena Refinery, and favorable results in the midstream segment. It also noted the efficiency program, which has enabled Ecopetrol to successfully face the challenging low crude oil price environment.

Moody’s also established the company’s outlook as negative, due to the impact that low international crude oil prices may have on the exploration and production segments.

***

Ecopetrol Announces Results for 1Q:16

(By Ecopetrol S.A. 3.May.2016) – Ecopetrol S.A. announced Ecopetrol Group’s financial results for the first quarter of 2016, prepared and filed in Colombian pesos (COP$) and under International Financial Reporting Standards (IFRS) applicable in Colombia.

— Amid the lowest Brent price of the last 12 years, in the first quarter of 2016 the Group achieved a net income attributable to shareholders of Ecopetrol of COP$363 billion.

— Net income attributable to shareholders of Ecopetrol, increased 127 percent as compared to the first quarter of 2015.

— Solid cash flow generation with an Ebitda margin of 39.5 percent, resulting in an Ebitda of COP$4.1 trillion for the first quarter of 2016.

— Group’s savings amounted COP$421 billion during the first quarter of 2016. The company continues to demonstrate its capacity to adapt under an adverse price scenario.

Ecopetrol S.A. President Juan Carlos Echeverry G. commented on the results:

“The price environment in the first quarter of 2016 continued to defy the oil industry, which saw the value of crude reach $28/barrel, a 12 year record low. Ecopetrol, however, managed to generate profits amid this challenging environment, focusing its efforts on reducing costs, increasing efficiency, producing profitable barrels and prioritizing cash generation.

During the first quarter of 2016 the price of Ecopetrol’s crude basket fell 43 percent and its refining margin fell 24 percent in comparison to those of the same period of 2015. The actions undertaken to operate more efficiently and with lower costs, coupled with the positive impact of the devaluation of the exchange rate over our revenues and the recording of a lower financial net loss allowed to register a growth of 127 percent in net profit attributable to shareholders and to improve the EBITDA margin compared to those of the first quarter of 2015. Additionally, the company maintained its operating margins and EBITDA at approximately COP$4,000 billion compared to the same quarter.

Savings in costs and expenses contributed to the obtained results, these amounted to COP$421 billion in the first quarter of the year, against a target of COP$1,600 billion for all 2016. The efficiencies are mainly due to the optimization of purchasing and contracting plans, better procurement strategies and renegotiation of contracts.

The reduction of the lifting cost, cash cost of refining and transportation costs, reported in the first quarter of 2016, compared to the same period last year, are a result of the progress made by the company pursuant to the Transformation Plan, the devaluation of the COP/USD exchange rate and austerity and activity reduction measures implemented in all business segments. Ecopetrol is working so that the obtained efficiencies become structural even in an environment of increasing prices in order to ensure profitable operations and financial sustainability.

The adjustments in CAPEX and OPEX implemented since 2015, in line with lower oil prices and the strategic prioritization of value over volume led to programmed lower activity and lower production in the first quarter of 2016, which came to 737 thousand barrels equivalent per day, compared to 773 thousand in the first quarter of 2015. This fall also reflects the natural decline and the temporary closure of some fields caused by low profitability or judicial decisions. Once market conditions and cash availability improve, the company expects to increase levels of investment in exploration and production and give way to investments that have been postponed in this low crude oil price environment.

In exploration, the deep water appraisal well Leon 2 in the Gulf of Mexico of the United States was completed. This one is operated by Repsol, which holds a 60 percent stake. The remaining 40 percent belongs to Ecopetrol America Inc. The company is awaiting the results of the evaluation of the information provided by the well, located in one of the regions with the greatest potential for hydrocarbons in deep waters in the world.

Between the first quarter of 2015 and 2016 the gross margin of the refining segment decreased by $4.5 per barrel mainly as a result of market conditions marked by lower spreads between prices of middle distillates and the price of oil.

The Cartagena refinery continued its boot and stabilization process, obtaining a regular operation of the delayed coking, catalytic cracking and diesel hydro-treaters units. As of March 31, 28 units of a total of 34 were operational. It is expected that all units in the complex will be in full operation by the second half of 2016. Additionally, loads of crude up to 140 thousand barrels of oil a day have been achieved.

Test of high viscosity crude transportation were started in February 2016. Satisfactory results were obtained moving oil with a viscosity of 405 centistokes (cSt). This project, along with the expansion of capacity in Ocensa (P-135) will reduce the cost of dilution which is key to the production of heavy crudes, which today represent about 58 percent of the total production of the Group.

In December 2015 the company imposed a significant cut on its 2016 investments compared to the levels of previous years with the approval of a budget of $4,800 million. The need to preserve the financial sustainability of the company with the low oil prices environment prompted a further cut in the investment plan for 2016, which now will range between $3,000 and $3,400 million. The expected production was adjusted to this new reality from 755 thousand barrels per day to approximately 715 thousand barrels of oil equivalent per day.

2016 is a transition year for the Ecopetrol Group during which the cycle of investments in Midstream and Downstream will conclude with some transport projects and the startup of the Cartagena refinery. From 2017 on the company will devote a greater proportion of its investments to Upstream.

Financing needs for this year are in the $1,500 – $1,900 million range, without taking into account the resources that may be obtained from the company’s divestment plan. To date, $475 million has already been obtained through credit facilities with local and international banks.

Cash flow was also leveraged by the results of the auction of Ecopetrol´s stake in ISA held in April 2016, which allowed allotting shares in the amount of COP$377 billion.

Shareholders also contributed to the financial strengthening of the company with the decision not to distribute dividends in 2016, which was made during the last general meeting of shareholders.

Operational excellence, focus on capital discipline, rationalization of investments and rotation of the portfolio of assets to generate cash flow have enabled Ecopetrol to successfully navigate the current price environment.

Ecopetrol continues to position itself for the future by strengthening its portfolio of exploration and production in order to seize opportunities that may be generated in the next cycle of higher crude oil prices. In this way we can ensure growth in the long term, financial sustainability and value creation for Ecopetrol.”

***

PetroEcuador Highlights Benefits of Esmeraldas Workover

(Energy Analytics Institute, 19.Apr.2016, Clifford Fingers III) – EP PetroEcuador stands to gain the most from the recent workover to the Esmeraldas Refinery, reported the state company in an official statement.

The primary benefit includes recuperating the 110,000 barrel-per-day capacity as well as increasing processing capacity, efficiency, and continuity while reducing the refining costs associated with the importation of refined products.

Other benefits to the workover include:

— Increasing the capacity of the FCC unit to 20,000 barrels per day from 18,000 barrels per day, thus boosting production of LPG and gasolines;

— Producing diesel with a lower sulfur content, resulting in a positive environmental impact and benefits to the health of citizens nearby;

— Save $305 million due to the reduction in derivative imports;

— Increase in the production of LPG by 250 tons/day, and gasoline by 5,600 barrels per day.

***

PetroEcuador Refineries Have 175 Mb/d Capacity

(Energy Analytics Institute, 5.Apr.2016, Clifford Fingers III) – EP PetroEcuador’s three refineries — Esmeraldas, La Libertad and Shushufindi — had a combined processing capacity of 175,000 barrels per day at year end 2015, reported the state company in an official statement.

The largest refinery is Esmeraldas, with a 110,000 barrel-per-day processing capacity. Followed thereafter by La Libertad (45,000 barrels per day) and finally Shushufindi (20,000 barrels per day).

Table: EP PetroEcuador Refineries in Ecuador (b/d/)

Refinery ———– Processing Capacity

Esmeraldas ——– 110,000

La Libertad ——– 45,000

Shushufindi ——- 20,000

Total Capacity —- 175,000

Source: EP PetroEcuador

***

Petroecuador Says Time to Buy Light Crude

(Reuters, 6.Oct.2015, Alexandra Valencia) – Ecuador’s state-run oil company Petroecuador said it is ready to advance discussions with 24 companies interested in supplying light crude to the Andean country.

The smallest OPEC member has said it wants to import crude for the first time in decades as light reserves are running out. The country primarily produces heavy crudes.

Ecuador is looking for foreign suppliers of around 30 million barrels of light crude to feed its renovated 110,000 barrel-per-day Esmeraldas refinery.

“If we reach an understanding convenient for Petroecuador, we are going to do it,” Petroecuador’s General Manager Carlos Pareja told reporters.

He confirmed meetings next week with companies that could submit offers of light crude, among which he highlighted Chile’s ENAP.

A document seen by Reuters separately said that Petroecuador is interested in acquiring crude of 28 API degrees of density and up to 0.7 percent sulfur.

The purchases would cover 12 months of deliveries, representing a volume of some 82,000 barrels per day (bpd) and becoming Latin America’s second-largest tender to buy crude, after Venezuela’s proposal to import 75,000-150,000 bpd.

Petroecuador’s intent is controversial in a country that has always been an exporter and is already suffering from low oil prices, reducing its dollar revenue.

However, Pareja defended his proposal noting that other countries such as Colombia are also looking for foreign suppliers of light crude.

***

PetroEcuador Esmeraldas Refinery Restarts FCC Unit

(PetroEcuador, 18.Sep.2015) – PetroEcuador says activities initiated on September 11, 2015 to restart the fluid catalytic cracker unit at the Esmeraldas refinery, according to a statement posted to the state oil company’s website.

The definitive restart of FCC unit is estimated for late-November 2015. The unit has undergone 14-months of work. The new FCC unit will allow for a 20,000 barrel per day (b/d) increase in capacity.

PetroEcuador also plans to restart the #2 oil plant in November.

Both the FCC unit and the #2 oil plant are expected to be 100% operative by YE:15, according to PetroEcuador.

***

$1.2 Bln Esmeraldas Rehab Work Near Complete

(PetroEcuador, 18.Sep.2015) – PetroEcuador says that overhaul work is being performed on processing units at the 110,000 barrel per day (b/d) capacity Esmeraldas refinery that have deteriorated due to inadequate maintenance work, according to a statement posted to the state oil company’s website.

Work is being performed on the catalytic No. 1 and No. 2 units with capacity to process 50,000 b/d each. The FCC unit has also undergone intervention while new units constructed during the work overhaul include: demineralizer and effluents plants; 2 raw water pits; and a quality control laboratory.

***

Pemex Looks to Improve Diesel Production

(Pemex, 14.Aug.2015) – The exchange of light crude between the U.S. and Mexico will improve the production of diesel and gasoline in the country.

Pemex has been notified of the approval of the application submitted to the Bureau of Industry and Security, Department of Commerce of the United States, earlier this year for a proposed exchange of crude oil, in order to import up to 100 Mb/d of light crude and condensates that will prove highly beneficial to the country since it will allow Pemex to mix them with local heavy petroleum and improve the process of fuel production in the Salamanca, Tula and Salina Cruz refineries.

Mexico produces mostly heavy crude oil, while the refineries mentioned above are configured to process light crude. This affects the industrial performance of these refineries, leaving Pemex with a high residual of fuel oil that is difficult to place at a good price in the international market and its consumption in domestic power plants is poorly competitive and inconvenient for the environment.

With the availability of light crude from the U.S., Mexico will be benefited, since Pemex will make mixtures of light and heavy oils which will result in increased production of gasoline and diesel, less volume of fuel oil, and will have better quality fuels that will benefit the environment.

The oil agreement will exploit logistical synergies which will reduce the transportation costs of raw materials.

Pemex will continue exporting oil to the U.S. for processing in US refineries that specialize in heavy crude, such as the one mostly produced by Mexico. In the first 7-months of 2015, total exports to various countries was 1.164 MMb/d, including just over 700 Mb/d to the U.S.

This exchange of crudes will strengthen trade relations between Mexico and the United States.

***

PDVSA’s Planned Shutdown of Cardon FCC Unit

(Energy Analytics Institute, Pietro D. Pitts, 11.Aug.2015) – The Paraguana Refining Center (CRP) will initiate a preventive shutdown of the Cardon Refinery’s Fluidized Catalytic Cracking Unit on August 13, 2015, according to a statement posted to PDVSA’s website.

Mechanical work will be performed on the equipment that is part of the unit in order to ensure the operational reliability of this plant that produces high-octane constituents used in fuel mixtures.

The CRP’s other Fluidized Catalytic Cracking Unit located at the Amuay Refinery is operating normally after the successful performance of its maintenance and safe start-up.

***

Ecopetrol Announces 2Q:15, 1H:15 Results

(Ecopetrol S.A., 5.Aug.2015) – Ecopetrol announced Ecopetrol Corporate Group’s financial results for the 2Q:15 and the 1H:15, prepared and filed in Colombian pesos (COP$) and on the basis of International Financial Reporting Standards (IFRS).

According to Article 3 of Decree 2784 of 28.Dec.2012 , the application date of the new technical framework is 31.Dec.2015 , therefore, the financial information presented prior to this date is subject to adjustments.     As indicated in paragraphs 9 and 18 of International Accounting Standard 27 “Consolidated and Separated Financial Statements,” Ecopetrol and its Corporate Group must present their financial information on a consolidated basis, combining the financial statements of the parent company and its subsidiaries line by line, adding assets, liabilities, shareholder’s equity, revenues and expenses of a similar nature, removing the reciprocal items between the Corporate Group and recognizing the non-controlling interest.

The financial results in this report are not comparable line by line with the previously issued financial results for the 2Q:14, which were prepared in accordance with the Public Accounting Regime (Regimen de Contabilidad Publica) as adopted by the Colombian National Accounting Office. For the sake of comparison, the financial results that were already reported in the 2Q:14 are presented in this report under IFRS.

Some figures in this release are presented in U.S. dollars (US$) as indicated (Editor’s Note: Tables Not Available in this edition). The exhibits in the main body of this report have been rounded to one decimal. Figures expressed in billions of COP$ are equal to COP$1 thousand mln.

In the opinion of Ecopetrol’s CEO Juan Carlos Echeverry G.:

“Ecopetrol is disciplined with its costs adjustment program, aimed to gain efficiencies in different areas. Thus, we have already obtained savings of COP$0.6 tln. These savings are mainly the result of renegotiations with our contractors. We have solidified our long term relationship; our allies understand that the current circumstances call for extraordinary actions, and the mutual commitment to mitigate the effects of this scenario of low oil prices.

The Barrancabermeja refinery is now more efficient, thanks to the operation of the new turbo gas unit, which will translate into efficiencies in the energy generation cycle and a lower emission of greenhouse effect gases of 200 thousand tons equivalent per year. We also improved the cost of drilling by lowering the average number of days required by well, in Castilla and Chichimene fields, from 34 days in 2014 to 28 in 2015.

Facing a challenging oil price scenario, the company is adopting the adjustments required, based on its recently announced strategy, to continue searching for efficient and profitable barrels.

In our transformation plan we identified 630 initiatives throughout the company, aiming at savings of COP$ 1.4 tln in 2015. We are promoting ethic and transparency in our purchase and contracting processes, and investment projects.

We continue to prioritize the lives of people and workers, the well-being of the communities in which we operate and the environment. The accident frequency index in Ecopetrol was reduced by 38% between the 2Q:14 and the 2Q:15, from 0.77 to 0.49 accidents/million hours of labor, reflecting improved labor conditions.

On another front, Ecopetrol was subject of an irrational wave of attacks against our transportation infrastructure in June, in some provinces located next to Venezuela and Ecuador’s borders. The company demonstrated, once again, its capacity to face the crisis by deploying 500 workers to stop the leakage in the Mira River and do all the cleaning tasks necessary to mitigate the damage caused.

In the finance area, this quarter was better than the previous due to the growth trend shown by crude and product prices, while the exchange rate, which holds a negative correlation to these, reversed part of the trend toward devaluation shown in the first quarter. This was achieved despite the deterioration in environment conditions around Jun.2015, stemming from attacks on transport infrastructure, which as we have repeatedly said, not only affected operations but caused irreparable damages to the environment and surrounding communities.

Production in the 2Q:15 reached 768 Mboe/d, in line with the goal of 760 Mboe/d, announced for 2015, representing an increase of 5% compared to production in the 2Q:14. This was the result of the opening of new facilities and the new drilling campaigns in the fields Castilla and Chichimene, as well as the normal operation of Cano Limon field throughout most of the quarter.

In exploration, drilling continued on the well Kronos, located offshore in the southern Caribbean (operated 50-50 by Anadarko in partnership with Ecopetrol), and drilling began on the well Sea Eagle in the U.S. Gulf of Mexico (operated by Murphy, WI 35%; Petrovietnam, WI 15%; and Ecopetrol America Inc, WI 50%).

In Jul.2015, Kronos well confirmed the presence of gas in ultra-deep waters. The discovery proves the geological model proposed for an unexplored area, with high hydrocarbon potential.

The refining margin of the Barrancabermeja refinery was $17.20/bbl in the 2Q:15, 58% more than in the 2Q:14 ($10.9/bbl). This was the result of better prices of refined products compared to crude and the higher yield of medium distillates.

The volume of crude transported in the 2Q:15 declined by 4% compared to the 1Q:15, due to the increased number of attacks on transport infrastructure, with 2 in the 1Q:15 and 44 in the 2Q:15, 36 of these in the month of June. Compared to the 2Q:14, volume transported increased by 7.8%.

In our commercial activity, in line with our strategy of diversifying the destination of our products, we exported to South Korea and the U.S. East coast. Also, with the purpose of increasing our footprint in the Asian market, we announced our first shipment of crude to Japan, following the conclusion of negotiations with the company JX Nippon, which bought 2 MMbbls of Castilla crude to supply its refining systems.

The improved financial result in the 2Q:15 compared to the 1Q:15 is the outcome of better crude realization prices, which increased from $43/bbl in the 1Q:15 to $53/bbl in the 2Q:15. Although cost of sales showed an increase of 10% compared to the 1Q:15, given the higher costs of maintenance, purchases and product imports, when compared to the 1Q:14 we had a reduction of 11%, reflecting the cost optimization strategies that are gradually beginning to materialize. In line with this, we achieved a $2.32/bbl reduction of our lifting cost, as a result of optimizations, between the 2Q:15 and the 2Q:14.

Our operating expenditures continued under control. Although in the 1Q:15 we recorded the applicable wealth tax for year 2015, in the 2Q:15 financial expenses were also reduced due to a lower impact of the exchange rate difference.

Thus, in the 2Q:15, the Corporate Group’s net revenue, attributable to Ecopetrol shareholders, was COP$1.5 tln pesos, compared to COP$0.16 tln in the 1Q:15 and COP$2.6 tln in the 2Q:14.

On another note, this past 26.May.2015, we announced to the market our new 2015-2020 strategy, aimed at profitable growth in exploration and production and maximization of efficiencies in transport and refining.

The strategy prioritizes value over volume, with emphasis on financial discipline, streamlining investments and divestment of non-strategic assets. The plan also foresees profound transformations within the organization, both in the business segments as well as in project management, technology, environment relations and investment portfolio management.

One month after launching our strategy, we successfully placed bonds in the international market for $1.5 bln , with an 11-year term and 3 times oversubscribed. The issue demonstrated, once again, the appetite and confidence of institutional investors in our company.

Also during the quarter, the risk rating agencies Fitch Ratings, Standard & Poor’s Ratings Services and Moody’s Investors Service, confirmed Ecopetrol’s ratings of BBB, BBB and Baa2, respectively, all with stable outlook, providing us the support needed to continue with our strategic plans as an investment grade issuer in the international capital market.”

***

PBF to Close Chalmette Deal by YE:15

(PBF Energy, 30.Jul.2015) – On 18.Jun.2015, PBF announced that its subsidiary signed a definitive agreement to purchase Chalmette Refining, LLC, consisting of the 189 Mb/d Chalmette Refinery and related logistics assets, from ExxonMobil and PDV Chalmette, LLC.

The purchase price for the assets is $322 mln, plus working capital including inventory to be determined at closing. The transaction is expected to close prior to YE:15, subject to customary closing conditions and regulatory approvals.

***

Pemex Cogeneration and Services BOD Installed

(Pemex, 30.Jun.2015) – The organic statute containing the organization and functions of the new productive state¬-owned subsidiary Pemex Cogeneration and Services was approved during the installation session of the Board of Directors.

The statute will become effective after its publication in the Official Gazette of the Federation.

This is one of the first structures approved for the new Pemex’s productive state¬-owned subsidiaries that were established as business lines with the purpose of value creation. On previous days, the Board of Directors of Petróleos Mexicanos approved the appointment of Eleazar Gómez Zapata as CEO of Pemex Cogeneration and Services, which will be responsible for exploiting the cogeneration potential of the company in order to increase operational efficiency and reliability in the production processes, and benefit from the economic, energy and environmental perks of the new electricity market derived from the Energy Reform.

In addition, the Board of Directors of Pemex Cogeneration and Services approved the appointments of the heads of the areas of this new subsidiary: Raquel Buenrostro Sánchez in Planning and Development; Alberto Elizalde Baltierra in Project Execution; Roberto Osegueda Magaña in Operations, and Rodrigo Sánchez Revilla in Marketing.

In this regard, a potential for cogeneration close to 5,000 megawatts has been identified in several areas of Pemex. Projects are currently being developed in the Cactus Gas Processing Complex; the Tula, Cadereyta, Salina Cruz and Minatitlán refineries, as well as in the Cangrejera and Morelos (Coatzacoalcos) petrochemical complexes in, with an estimated total investment of 6 billion dollars.

Cogeneration projects are part of Pemex’ business strategy oriented toward the mitigation of greenhouse gases. With the startup of operations of the aforementioned projects, an annual reduction of 15 million tons of CO2 is estimated nationally.

***

ExxonMobil Sells Share of Chalmette Refinery in Louisiana

(Exxon Mobil Corporation, 18.Jun.2015) – ExxonMobil reached an agreement with PBF Energy Inc. for the sale and purchase of its 50% interest in Chalmette Refining, LLC in Chalmette, Louisiana.

“This decision is the result of a strategic assessment of the site and how it fits with our large US Gulf Coast Refining portfolio,” said Jerry Wascom, president of ExxonMobil Refining & Supply Company.

PBF will purchase 100% of Chalmette Refining, LLC, which is a JV between affiliates of Petróleos de Venezuela, S.A. (PDVSA) and ExxonMobil.

The agreement includes the Chalmette refinery and chemical production facilities near New Orleans, Louisiana and the company’s 100% interests in MOEM Pipeline, LLC and 80% interest in each of Collins Pipeline Company and T&M Terminal Company. ExxonMobil operates Chalmette Refining, LLC and Mobil Pipeline Company, an ExxonMobil affiliate, operates the logistics infrastructure.

We regularly adjust our portfolio of assets through investment, restructuring, or divestment consistent with our overall global and regional business strategies, said Wascom.

“ExxonMobil remains committed to doing business in Louisiana through ongoing operations at the Baton Rouge refinery and chemical plants, the development and production of oil and natural gas resources, and sales of fuels and lubricants. All of these businesses are unaffected by this agreement,” said Wascom.

Subject to regulatory approval, change-in-control is anticipated to take place by YE:15. Details of the commercial agreements are proprietary.

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Rafael Ramirez Speech in Caracas

(Energy Analytics Institute, Piero Stewart, 7.Oct.2013) – PDVSA President Rafael Ramirez spoke with journalist in Puerto La Cruz, Venezuela.

What follows are excerpts from the discussion.

Rafael Ramirez regarding shipments to China:

Ramirez: We are currently exporting 640,000 b/d to China and 430,000 b/d to India.

We are supplying oil to China but we are arriving to a point that we need to build new refineries in the country so that they can process our heavy oil. That is why we are working with CNPC on a refinery project in Jieyang. In contrast, India has installed refining capacity, so India is another natural market for our heavy oil.

Regarding Lukoil pulling out of Carababo project in the Faja:

Ramirez: The Russian companies are looking for one primary company and not so many small companies in Venezuela. As a result, Rosneft has been looking to increase its participation in projects.

The situation regarding Lukoil and Rosneft in the Carabobo project is between Russians. We have given Rosneft authorization to move forward with the assumption of Lukoil’s stake and we do not have a problem with this.

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Rafael Ramirez Speech in Puerto La Cruz

(Energy Analytics Institute, Piero Stewart, 4.Oct.2013) – Venezuela’s Oil Minister President Rafael Ramirez spoke with journalist in Puerto La Cruz, Venezuela.

What follows are excerpts from the discussion.

Rafael Ramirez on the economic sector:

Ramirez: We have bonds that we are using to bring in food stuffs to guarantee supply to the Venezuelan people.

We will not use our dollars to create a parallel market. However, there are actors that are misusing these dollars to feed the speculative market.

We have to neutralize the elements that are conspiring against our economy in the parallel market that are creating distortions in Venezuela and of course affecting the people.

We will use our existing $600 million bonds to buy foodstuffs from Colombia. We will conduct whatever operation that is necessary to reestablish equilibrium in the area (of food distribution).

There are people in the private sector that have all the responsibility for everything that is happening to the Venezuelan economy. We will not use our dollars to create a parallel market, it would be a foolish move, right?

However, there are actors that are directing the use of the dollars that PDVSA is generating to supply this speculative sector. This is something that cannot be done by a maid or a student but economic actors that control large bolivar volumes and that continue to attack our economy. The actors working against the economy are different from those in the government.

On the petroleum sector:

Ramirez: We still need to finish work on the ICO pipeline system which will allow us to carry all of our gas from Eastern Venezuelan to Western Venezuela. The Northern Monagas region has become a great gas producer with 400 MMcf/d of gas.

The Faja did not have infrastructure to transport gas since the old associations said the Faja contained bitumen. Now that we are finding sufficient gas in the Faja coupled with gas from offshore, we will have sufficient gas to cover domestic demand as well as supply the Colombian market.

On gasoline/component imports from the U.S.:

Ramirez: We continue to import components to produce gasoline. It is a complex situation that we continue to evaluate.

We have taken control of the JV we had with Eni and we expanding the JV to produce the MTBE that we need. We continue to move forward with ethanol projects with the goal to mix 10% ethanol with our gasoline.

The Venezuelan driver consumes primarily 95 octane gasoline since the price between 95 and 91 octanes is the same, and under the perception that 95 octane is better for the automobiles.

On the Faja; companies leaving the Faja:

Ramirez: OPIC and PetroCanada were never in the Faja. Lukoil’s decision to leave Junin 6 was taken by the Russian consortium. It is a problem between the Russians. Rosneft President Igor Sechin has said his company wants to have a controlling or operating company in the consortium. We think it is a good decision since we would have one principal Russian voice in the JV.

PDVSA has to have a majority/controlling stake in the Faja projects because the transnational companies have their international strategies while PDVSA has a national strategy.

We have different options/offers to explore regarding Petronas’ 11% stake in Carabobo 1.

We are producing 3 MMb/d and working hard to increase production capacity.

The internal market in Venezuela is consuming 700 Mb/d, up due to increased demand for diesel. Venezuela is exporting 2.4 MMb/d, we want to send more gas to our electric sector which will allow them to switch from diesel to gas.

We plan to export at least 150 MMcf/d of gas to Colombia in July/June of 2014.

We are looking for alternatives so that early production materializes. Early production should approach 50,000 b/d from seven projects in 2013.

Junin 1: Sinopec agreement signed and companies working to constitute the JV and achieve production of 200,000 b/d. Junin 10: CNPC has agreed to participate in the JV and in the upgrader expansion with PDVSA. PDVSA has increased production at the project by 15,000 b/d in one year. We plan to expand the existing upgrader.

On the Abreu e Lima refinery project in Brazil:

We are still in discussions with Petrobras regarding the Abreu e Lima refinery project but this is a topic we will not discuss over a microphone. However, we want to be in the project.

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Q&A with Arthur Little’s Rodolfo Guzman

(Energy Analytics Institute, Pietro D. Pitts, 24.Sep.2013) – Arthur D. Little Partner Rodolfo Guzman spoke with Energy Analytics Institute in a brief interview from Houston, Texas. What follows are excerpts from the brief interview.

Regarding PDVSA’s potential departure from Abreu e Lima refinery project in Pernambuco, Brazil:

EAI: It appears PDVSA is close to leaving the Abreu e Lima refinery project in Brazil, is that a surprise to you: Why or why not?

Guzman: I wouldn’t be surprised if they leave the project. One reason is that PDVSA is financially not in a strong position to invest internationally; second, the execution capabilities of the company are limited.

The Abreu e Lima project was originally planned to receive heavy oil from Venezuela and Brazil. Now with all the pre-salt developments and future supply in Brazil, the dependence on Venezuela crudes for the refinery is lower. So, again, I am surprised that they may withdraw from the project.

PDVSA has a lot of priorities in Venezuela and the company’s refinery projects in the domestic market are moving forward very slowly. So why would the company commit to an international venture when they cannot progress with their own projects in Venezuela?

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Q&A with PDVSA Refining Director Jesus Luongo

(Energy Analytics Institute, Piero Stewart, 9.Sep.2013) – PDVSA Refining Director Jesus Luongo spoke briefly with Energy Analytics Institute on the sideline of a press conference in Caracas, Venezuela.

What follows are excerpts from the brief interview.

EAI: What is the processing capacity at Amuay?

Luongo: Amuay is processing 445,000 b/d. We are waiting on the #2 distillation unit to come online in Oct.2013. Thereafter processing capacity should reach 480,000 -500,000 b/d.

EAI: Any major developments at Amuay?

Luongo: We are constructing a naphtha treatment unit at Amuay. The unit is 65% complete but is expected to be ready sometime in early-2014. We don’t have any projects that will come online during the remainder of 2013.

EAI: Is there proof sabotage caused the accident at Amuay?

Luongo: Amuay has old installations, which were not constructed to prevent sabotage. There are communities very close to the Amuay (southern flank), that is why we cannot deny that it is possible that someone could enter the southern flank of the refinery.

EAI: Is Amuay under Yellow Alert?

Luongo: All of our refineries in Venezuela are under “Yellow Alert” and have been since early Aug.2013. “Yellow alert” means that all of our personnel must to be prepared for a possible event or events against the refinery installations.

EAI: How much will insurance cover of the Aug.2012 explosion at Amuay?

Luongo: We are not sure how much the insurance will pay. We are taking this opportunity to bring our systems/tanks up-to-date with international safety standards/norms.

EAI: Are investigations into the Aug.2012 accident being conducted?

Luongo: We have always conducted preventative maintenance to check numerous conditions at the pump at the center of the accident.

There are various investigations that are ongoing: fiscal, state, CICPC, and PDVSA/Intevep. At this point, state authorities have presented the evidence to PDVSA/Intevep for the work related to PDVSA/Intevep investigation.

EAI: If it is sabotage, will the insurance cover the cost?

Luongo: I am not sure at this moment.

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Amuay Explosion in 2012 Cost PDVSA $1.8 Bln

(Energy Analytics Institute, Ian Silverman, 13.Aug.2013) – The Energy Orientation Center (COENER) announced the Amuay refinery explosion will cost PDVSA $1.8 billion.

The explosion at the Amuay refinery was caused by a gas leak at Block B23 and occurred at 1:10am on 25.Aug.2012 and was the largest tragedy to-date to affect Venezuela’s national refining circuit, COENER says. As a result of the explosion, 42 people died, 5 are still listed as missing and 150plus received seriously injuries.

The full COENER report includes approximately 500 pages and analyzes the accident, potential causes, and economic and environmental impacts for PDVSA and Venezuela.

The 645,000 b/d capacity Amuay refinery, 310,000 b/d capacity Cardon refinery and 16,000 b/d capacity Bajo Grande refinery make up the 971,000 b/d capacity Paraguana Refining Complex (CRP by its Spanish acronym), which is located in Venezuela’s western state of Falcon.

The COENER report said that PDVSA’s insurance company revealed approximately 100 fires at the CRP in 2011, of which the majority is yet to been investigated.

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Q&A with Oil Outlook President Carl Larry

(Energy Analytics Institute, Pietro D. Pitts, 9.Aug.2013) – Oil Outlook President Carl Larry spoke with Energy Analytics Institute in a brief interview from Houston, Texas.

What follows are excerpts from the brief interview.

EAI: Are US refiners benefiting from PDVSA’s refinery problems in Venezuela?

Larry: We have seen production in the US in the last year picking up and we are seeing a lot of refinery runs, which have lifted exports which are at a record high.

Because of gasoline usage that we have seen in Venezuela, it has created an opportunity for US Gulf Coast refineries to pick up the slack to really push out more exports.

Additionally, we see a lot of the US Gulf Coast refineries bringing in a lot of heavy and medium crudes from either Venezuela or Saudi Arabia. The focus has shifted from bringing in lighter sweets, which we have done historically, to bringing in more medium to heavy grades (heavier sour grades). Further, we are seeing more being pulled out of Cushing and down into now the Gulf Coast.

There is an abundance of light sweet because of the shale programs, whether Eagle Ford in Texas or Bakken, and we are seeing a lot of that get pushed to the East Coast and the Mid-West.

We have seen a desperate need for sours and heavies ever since 2004-2005 when the refineries in the Gulf Coast were switching their slates to a heavier grade because of the cost differences.

Now we are experiencing a situation where it is cheaper to bring in light sweet in but the refineries are now geared up to bring in medium to heavy. We are seeing a lot more production but because of that we are seeing more pressure on the heavier sour grades.

Exports are key here. The longer we can keep those refineries up and running, it’s a good thing for the US refining system but at end of the day it is all about global demand and not so much US demand.

EAI: Could PDVSA be at a point whereby it is ready to divest of its CITGO Corp. refining operations in the US?

Larry: Venezuela is facing the same issues as a refiner as Saudi Arabia. There is not this demand in the US for product anymore and definitely not crude, so like Saudi Arabia there is race to get to Asia and especially China and get in front of them and sign longer term deals. So, the longer Venezuela deals with the US and the up and down demand here, the more time they are losing with bigger customers.

I can see why they would want to strengthen those ties before someone else stepped in. I could see PDVSA wanting to exit the US since there is not

really a big need here anymore for refineries or crude for that matter.

The focus for PDVSA and Venezuela should be the up and coming countries that will be demanding more oil, probably China and maybe Japan as well.

EAI: What companies would you put on a short list as being interested in the CITGO refineries?

Larry: I think ExxonMobil is a name that will come to the forefront, but Chevron Corp. might be another one that might be looking to expand. With significant exposure in Latin America, the refineries could be a natural fit for Chevron if there is an opportunity to expand.

EAI: Do you see a market for PDVSA’s Caribbean refineries?

Larry: It all depends on global demand. The Caribbean refineries are looking for a lot more global demand to make their margins profitable. The US is no longer relying on the Caribbean to give it the product, the demand is now going in the opposite direction. So, PDVSA’s refineries and others in the Caribbean become more global macro-sensitive than they have been in the past.

Editor’s Note:

PDVSA’s 100% controlled US subsidiary CITGO Corp. owns outright three refineries with combined processing capacity of 749,000 b/d. PDVSA also has a 50% interest in two additional refineries with a combined processing capacity of 679,000 b/d, according to PDVSA’s 2012 annual report.

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Paraguana Refining Center Running at 717 Mb/d

(Energy Analytics Institute, Piero Stewart, 6.Jul.2013) – With the five distillation plants at Amuay Refinery operating, average processing levels at the Paraguana Refining Center (CRP) were 717,000 b/d in June 2013, announced PDVSA Refining Director Jesus Luongo. The refinery was expected to be processing 736,000 b/d in July 2013.

CRP Operations Manager Ramon Uzcategui said Amuay was sending out normal levels of gasoline, Jet A1 and other finished products.

Venezuela’s refining circuit produces combustibles according to demand in the domestic market and always has a seven-day inventory of gasoline, PDVSA said.

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Ecuador Open Market Meetings in Houston

(Energy Analytics Institute, Ian Silverman, 25.Jun.2013) – PetroEcuador holds open market committee meetings in Houston, Texas.

Highlights from the discussion follow:

Comments from PetroEcuador International Commerce Executive Nilsen Arias:

  • “Oil’s contribution to the energy matrix was 85% in 2010, but will fall to 65-70% in 2013.”
  • “Demand for gasoline, diesel and naphtha to exceed production.”
  • Feb.2014 will mark the turnover of Las Esmeraldas refinery which will allow it to produce clean fuels.
  • Ecuador does not have refining capacity to produce LPG, diesel, naphtha, which are imported.
  • LPG imports used for domestic cooking in Ecuador.
  • Cutterstock used for produce fuel oil in Ecuador.
  • Ecuador imports high octane naphtha and ultra-low diesel.

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