Venezuela close to declaring force majeure on crude exports

Jun 08 2018


Venezuela could be about to declare force majeure on contracts with some of its major crude buyers.

This is due to falling output from its oil fields and tanker bottlenecks at its ports, according to a Reuters report.

 

There were more than 70 tankers off the coast of Venezuela earlier this week, according to Thomson Reuters vessel tracking data.

 

State-owned oil company PDVSA was believed to have told some customers that vessels should be equipped for ship-to-ship cargo transfers instead of loading at jetties in ports. If they do not accept this, PDVSA will consider declaring force majeure, sources told Reuters.

 

It was later reported that PDVSA has completed the first ship-to-ship (STS) transfer involving the Suezmax ‘Sonangol Kalandula’, which was believed bound for Tipco Asphalt's refinery in Kemaman, Malaysia.

 

According to the Reuters data, the vessel has not yet sailed and has been waiting since February to load Venezuelan Boscan heavy crude.

 

PDVSA had separately begun to notify all of its customers that it will no longer receive tankers for loading at Jose or Paraguana, its main export terminals, until ships already waiting are loaded.

 

Most customers have so far refused the ship-to-ship transfer request, due to the lack of  third party supervision for the operations, according to shippers and traders. Additional costs for completing the transfer have also contributed to the refusals.

 

PDVSA has been using sanctions imposed on the company by the US as a rationale for the change, according to one source.

 

Venezuela's export terminals have become congested as last month, US oil major ConocoPhillips won a court orders freezing PDVSA's key Caribbean assets, from where the Venezuelan company used to ship large cargoes to Asia.

 

Traders and shippers were sceptical that the transfers would succeed in easing the bottlenecks, as PDVSA will still have to load vessels at Jose to ship the cargo to the proposed offshore transfer sites, and production declines are not expected to ease.

 

Venezuela's crude exports declined by 28% in the first four months of this year to 1.19 mill barrels per day, compared with 1.65 mill barrels per day in the same period last year, according to Reuters trade flows data.

 

In January to April, crude output fell to 1.62 mill barrels per day, the lowest annual average in over three decades.

 

As mentioned above, aggravating the export problems, last month ConocoPhillips started to seize PDVSA's terminals, oil inventories and cargoes in the Caribbean to enforce a $2 bill arbitration award in a dispute over the socialist government's nationalisation of the US oil major's Venezuelan assets.

 



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