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Looming naphtha gap for Orinoco belt oil to slash Venezuela's oil exports



By Argus


Petroleumworld 01 31 2019

Venezuela needs to quickly secure new naphtha supply to avoid losing up to a third of its crude exports and a fifth of its production that relies on the US diluent supply now subject to US sanctions.

According to internal data from state-owned PdV, around 350,000 b/d of the 1mn b/d of crude exports by PdV and its Orinoco joint ventures is diluted crude (DCO), a blend of 8°-10°API Orinoco crude and 30pc naphtha. Because of the new naphtha restriction, part of these DCO shipments will be shut in by next month.

Naphtha is a low boiling-point hydrocarbon that can be processed into gasoline blendstocks, chemical products and as a diluent for heavy crudes. Around 50,000 b/d of imported naphtha is critical to transporting 650,000 b/d of DCO production from the Orinoco heavy oil belt to Jose on the coast of Anzoategui state.

At Jose, two thirds of the DCO production is processed into lighter synthetic crude for export by three PdV-led operational upgraders PetroPiar with Chevron, PetroCedeño with Total and Equinor, and PetroMonagas with Rosneft and blended with domestic light Mesa grade by the Sinovensa joint venture with China's CNPC. Part of the naphtha in the DCO is stripped out at Jose and recirculated back to the oil belt for re-use.

The balance of the DCO that is not processed at Jose is exported directly into the international market. Among the buyers is India's Reliance and Chevron.

DCO exports reached a high of almost 400,000 b/d in late 2018 because of operational problems with the PetroMonagas and PetroPiar upgraders, compared with 150,000 b/d at the start of 2018.

Under the US sanctions announced on 28 January, US companies are blocked from exporting diluent to Venezuela. "Of course Venezuela can buy the naphtha elsewhere, but it has to move quickly, because of pricing issues and navigation times," a senior PdV official tells Argus .

Faced with the loss of naphtha supply, PdV and its joint ventures will have to dial back about 240,000 b/d of extra-heavy production from the oil belt that normally goes toward making DCO for direct export into the market, according to PdV internal estimates. Storage in the oil belt is limited to a few days.

Venezuela´s crude production had recovered slightly to 1.2mn b/d in December 2018 following upgrader repairs and a shift in operational control to CNPC at Sinovensa. For now production is steady, but the PdV official warned that a decline is imminent.

The first to feel the impact of the looming naphtha shortage are likely to be PdV's newer Orinoco joint ventures that were never integrated with new upgrading or blending capacity as originally planned. These include PetroCarabobo with Spain's Repsol and Indian partners led by ONGC; PetroIndependencia with PdV´s main partner Chevron; PetroJunin with CNPC; and PetroMiranda with Rosneft. PetroCarabobo seems especially vulnerable, as the others have upgrading capacity at Jose, even though capacity there is limited.

PdV's wholly owned San Felix upgrader at Jose is mothballed.



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