Venezuela's PDVSA mulling force majeure on oil exports -sources

Oil is the financial lifeline for the embattled socialist government of President Nicolas Maduro, but his cash-strapped administration has failed to invest enough in the industry to prevent its decline.

PDVSA is notifying all its customers that it will no longer receive new tankers for loading at Jose or Paraguana terminals until it manages to fill the vessels already waiting, one of the sources said.

The delay could breach Venezuela's state-run PDVSA's crude supply contracts if they are not quickly cleared.

The company's proposed STS transfer solution, to be performed in waters about 10km from Venezuela's Cardon refinery, faces resistance among oil buyers, according to shippers and traders.

Dozens of senior executives of the state-owned PDVSA oil and gas company have been arrested as part of ongoing anti-corruption investigations.

The OPEC member's export terminals have grown overcrowded since ConocoPhillips last month won court orders freezing PDVSA's key Caribbean operations, where the company used to ship large cargoes to Asian destinations.

Another buyer of Venezuelan oil said chances were slim that any customer would contest force majeure, choosing instead to negotiate differences in pricing because of the transfer costs involved.

"We are going to try the ship-to-ship idea first", the source familiar with the matter said.

"Many customers are going to prefer this than continuing to accumulate demurrage", the source added, referring to fees charged for long waiting times. Nayara Energy, Valero Energy and units of CNPC, which each had vessels awaiting loadings on Thursday, did not reply to a request for comment.

Venezuela has released two local executives of Chevron Corp jailed two months ago during a corruption probe in the oil sector, a local consultancy and a source close to the U.S. oil major said on Wednesday.

PDVSA did not reply to requests for comment. But the firm missed even that lowered target.

"There's an average deficit of 422,000 barrels per day (bpd) between real and planned production so far this year", according to one of the documents.

PDVSA's oil production has been plummeting and it is currently around 1.4 million bpd, according to estimates. The firm shorted deliveries to 12 of 14 major customers with long-term crude supply contracts, the records show. The nation's crude exports in the first five months of 2018 were 27% lower than in the same period of 2017.

Venezuela's crude exports fell 6% in May to 1.168-million barrels a day following US ConocoPhillips' legal actions to seize PDVSA's assets in four Caribbean islands, according to the data.

  • Monte Muniz