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US imports of Venezuelan crude likely ended by payment rules -analysts



By Brian Scheid / Platts


Petroleumworld 01 30 2019

Has Venezuela shipped its last barrel of crude oil to the US?

As long as President Nicolas Maduro remains in power, that is entirely likely, analysts said Tuesday.

"The cargoes on the water today may be the last ones coming," Kevin Book, managing director with ClearView Energy Partners, said.

"It's not immediate," said John Auers, executive vice president of Turner, Mason & Co. "But Venezuelan crude will likely stop within the next month."

Under sanctions on state-owned Venezuelan oil company PDVSA announced by the Trump administration Monday, US refiners will be permitted to continue to import Venezuelan crude, at least for three months. However, payments for these crude shipments must be deposited into a blocked, interest-bearing account located in the US.

"If the people in Venezuela want to continue to sell us oil, as long as the money goes into blocked accounts we will continue to take it, otherwise will we not be buying it," US Secretary of the Treasury Steven Mnuchin said Monday.

These sanctions measures, outlined in a series of general licenses, are designed to keep oil revenues from the Maduro regime and, ultimately, transfer them to the still-forming regime of opposition leader Juan Guaido should he become president. Last week, the US recognized Guaido as Venezuela's legitimate president.

If Maduro remains in power, however, payments from US refiners for Venezuelan crude will remain in blocked accounts in the US. This means, multiple sources said Tuesday, that PDVSA would be supplying US refiners with crude for free, a practice Maduro is unlikely to agree to.

"Why would PDVSA continue to sell crude to the US if they knew they weren't going to be paid?" asked Ginger Faulk, a partner with the Eversheds Sutherland law firm. The restrictions on payments to PDVSA "act as an immediate ban" on Venezuelan crude exports to the US, she said.

US imports of Venezuelan crude averaged about 574,000 b/d in December, down roughly 40% from July 2016, when US refiners imported more than 850,700 b/d, according to US Customs and Border Protection data. US imports of Venezuelan crude fell as low as 409,150 b/d in February 2018, the data show.

Elizabeth Rosenberg, director of the energy program at the Center for a New American Security and a former senior sanctions adviser at the Department of the Treasury, speculated that PDVSA may continue to ship to the US, even with payments being withheld. Rosenberg said the Maduro regime may choose this path, which she referred to as the "revenue zero" option, in order to continue production and maintain oil field integrity and avoid potentially high storage costs.

But most analysts said flows between Venezuela and the US likely have ended until a regime change occurs.

"Maduro has no incentive to continue [to ship crude to the US]," Book said.

Auers said two to three weeks worth of Venezuelan crude, which US refiners purchased prior to Monday's sanctions announcement, will likely continue be shipped into the US.

The restrictions do not apply to payments already made for crude deliveries over the next month. This means tankers of Venezuelan crude currently heading to the US are not subject to the restrictions as long as payment was already received, sources said.



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Edited by Brian Scheid from Platts / SPGlobal.

01 29

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