Venezuela-Cuba oil link under US government scrutiny

By Argus

WASHINGTON
Petroleumworld 03 12 2019

The US government is warning the shipping industry not to facilitate Venezuelan oil supply to Cuba, a close ally of Caracas that is seen as propping up the government of President Nicolas Maduro.

"The Venezuelan National Assembly has decreed the suspension of crude exports to Cuba following the collapse of the national electrical grid," US national security adviser John Bolton said on Twitter yesterday. "Insurance companies and flag carriers that facilitate these give-away shipments to Cuba are now on notice."

Bolton´s assertion followed a call by Venezuelan opposition leader Juan Guaidó for international help to thwart oil flow to the island. "No more oil delivery to Cuba … and we ask for international cooperation to carry this out," he told the National Assembly yesterday.

Shipping data indicates that little Venezuelan oil has actually been flowing to Cuba in recent weeks, suggesting that the call is more political than practical.

Venezuela´s national oil company PDVSA (PdV) regularly supplied crude and refined products to Cuba since the two countries signed a state-to-state agreement in 2000. The supply fell to around 50,000 b/d late last year from more than 100,000 b/d in 2015 in response to declining Venezuelan production, according to internal PdV data obtained by Argus .

Faced with a persistent fuel shortage, Havana has since forged spot deals with other oil suppliers such as Algeria´s Sonatrach. PdV´s oil exports have stalled altogether since a catastrophic blackout swept across Venezuela last week. Even before the lights went out, US oil sanctions had left some 14mn bl of crude backed up at Venezuelan terminals and on tankers anchored offshore.

PdV traditionally utilized its leased Bullen Bay terminal on the Dutch-controlled island of Curacao to facilitate part of its supply to Cuba. But since mid-2018, the crude shipped from Curacao to Cienfuegos in Cuba is Russian Urals grade, not Venezuelan crude, shipping sources say. The medium sour Urals is typically discharged into onshore tanks at Bullen Bay and later picked up by Cuba-bound vessels such as the Panama-flagged S-Trotter and Greek-flagged Nedas . The latter tanker last picked up Urals at Bullen Bay in mid-February, bound for Cienfuegos where Cuba´s state-owned Cupet runs a 65,000 b/d Soviet-era refinery. Cuba is believed to resell some of the oil into the market to generate cash.

In Curacao, PdV previously used Bullen Bay for ship-shore-ship operations of its heavy Boscan and Bachaquero grades to accommodate long-haul Asian destinations such as China and Malaysia.

But the use of Curacao as a stopover has fallen off sharply since May 2018, when US independent ConocoPhillips imposed liens on PdV´s assets to try to collect an arbitration debt. Seizures by other creditors remain a risk to PdV across the Dutch Caribbean. The Panama-flagged Icaro has been stalled in Bullen Bay since December 2018 because of pre-judgment attachments.

According to its two-decade-old bilateral agreement with Caracas, Cuba pays for the Venezuelan oil with the deployment of experts in the fields of security, healthcare and sports, among others. Opponents have long derided the arrangement as an oil "giveaway", a view that some of Maduro´s supporters quietly share.

Even though little or no Venezuelan oil is reaching Cuba now, tens of thousands of Cuban officials are still deployed in Venezuela, with dozens stationed in Miraflores presidential palace.

The Venezuelan opposition´s call to cut off oil supply to Cuba coincides with a tense political standoff between Maduro and Guaidó, the assembly president who is recognized by most Western countries as Venezuela´s interim leader. Guaidó addressed opposition lawmakers yesterday after issuing a decree declaring a "state of national alarm" in response to the prolonged electricity blackout. "Our oil, the oil of the Venezuelan people, is urgently needed to address this national emergency."

The call prompted a standing ovation in the legislative chamber, underscoring widespread bitterness over Cuban meddling in Venezuela even if little of the country´s oil is now going there.

The nationwide outage has left millions of Venezuelans without power and associated water supply since 7 March. Power has since been restored in about three-quarters of Caracas and other areas of the country, but supply remains erratic.

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