Signs of a crisis in the Venezuelan oil industry have been evident for years, but the issue took a turn for the worse recently with the effective closure of the main deepwater crude oil loading terminals, due to congestion. The state-owned oil company, Petroleos de Venezuela SA (PDVSA) is said to be considering declaring force majeure, which would allow it to temporarily fail to meet contract obligations.
Tanker owners and operators are being effectively forced to load crude oil via ship-to-ship (STS) transfer, which requires specialist equipment and crew training. PDVSA is said to be paying for the extra cost of STS loading through a price discount method.
According to local reports, the Suezmax Sonangol Kalandula is the first tanker to load Venezuelan crude oil using STS since PDVSA proposed the alternative. The tanker has been waiting in the region since February 2018.
Another 60 Suezmax and Aframax tankers appear to be idle (steaming at 4 knots or less) in the region of Venezuela, according to the VesselsValue tracking tool. Local reports suggest that 24M barrels of crude oil are due for loading, equivalent to the load programme for April.
The congestion amid the Venezuelan crude oil loading terminals has been caused by the seizure of PDVSA’s deepwater crude oil storage and loading assets in the Caribbean by unpaid service companies. This hinders loading of tankers bound for Chinese and Far East customers. Port congestion is also delaying the import of crude oil and products into Venezuela.
According to the US Energy Information Administration (EIA) Venezuelan oil production declined to 1.6M b/d in January 2018, from 2.3M b/d in January 2016. A combination of relatively low global crude oil prices and the mismanagement of Venezuela’s oil industry has led to these accelerated declines in production, the EIA reported.
The EIA also reported that the number of crude oil-producing rigs in Venezuela has declined by nearly 50% in the same period and that missed payments to workers, managers and service companies has led to a loss of knowledgeable personnel to operate and repair production facilities, and the aforementioned seizure of assets.
In another twist, PDVSA is required to import lighter liquids (cutting stock) to make the extra-heavy crude oil from the Orinoco Oil Belt marketable. Delays in payments to foreign suppliers has reduced the availability of cutting stock and this has also reduced crude oil exports, according to the EIA.
Other issues with Venezuelan ports include the possibility of objects carrying drugs being attached to hulls. In a recent legal ruling, such attempted smuggling was deemed not to be a “malicious act” in a war risk claim.