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Venezuela mulls use of private-sector
to diffuse the fuel crisis

Edilzon Gamez/Getty

Venezuela with no gas, amid the coronavirus disease outbreak and an economic crisis

By Argus

Petroleumworld 04 10 2020

Fuel-starved Venezuela is weighing a full-scale opening of oil imports and distribution to the private sector, according to two members of a presidential commission created last month to restructure state-owned oil monopoly PdV (PDVSA).

The move would mark a radical departure from decades of state control over the oil industry, from the wellhead to the pump, where once giveaway prices have soared to at least $2/liter as a result of the scarcity.

Some senior government officials believe that allowing private operators to import and distribute gasoline and diesel is the quickest way to replenish supply that is now almost completed exhausted, impeding the distribution of food and medical aid intended to check the Covid-19 outbreak.

PDVSA has struggled to import gasoline that used to come from the US before the White House imposed [oil sanctions] on the company in January 2019. Even before the oil sanctions, PDVSA was at odds to pay for cargoes because of US financial sanctions put in place in 2017. And for years before that, PdV's 1.3mn b/d domestic refining system steadily deteriorated, and today produces little or no fuel at all. When fuel was abundant, an estimated 100,000 b/d was smuggled abroad, mostly to neighboring Colombia where pump prices are closer to market levels. Part of the supply was also redirected to political ally Cuba .

The acute fuel shortage has now grounded up to 90pc of Venezuela's nearly 5mn vehicles, including cars, trucks and buses. The military guards the few stations that still have gasoline or diesel in their modest tanks, officially reserving supply for essential services during the pandemic.

The final decision on opening the fuel sector rests with President Nicolas Maduro, but PDVSA restructuring commission co-chairs Tareck El Aissami and Asdrubal Chavez have said the idea "has merit," one of the commission members tells Argus .

El Aissami is industry vice president and Chavez is a former oil minister and president of PDVSA 's Houston-based downstream unit Citgo, now controlled by the political opposition. Maduro "has confidence in their ability to rescue PDVSA," a presidential palace official said.

The proposal under discussion would allow Venezuelan private investors or companies to purchase and import gasoline and diesel, distribute the fuel nationwide and sell it from service stations that PDVSA would transfer to them.

The imported fuel would be discharged at PDVSA terminals that are located near its mostly inoperative refineries in Zulia, Falcon, Carabobo and Anzoategui states, and distribution from terminals to service stations would be handled by the private operators, the commission members said.

PDVSA would also transfer dozens of fuel tanker trucks still in service to the private sector to facilitate distribution.

The commission members declined to identify the interested parties, but one said they are Venezuelans who are not subject to US or EU sanctions and who have the "financial means and contacts" needed to buy fuel and charter tankers.

Among the obstacles is the need to formalize higher pump prices, which Venezuela kept artificially low for decades, generating huge losses for PDVSA.

PDVSA restructuring commission members who favor the private-sector proposal assert that the current black market prices demonstrate a willingness by some drivers to pay whatever is necessary to reliably fill up their tanks.

At the refining level, the Maracaibo-based oil services chamber (CPV) is backing a second proposal that would allow private-sector investors to import, install and operate small modular refineries to process domestic light crude into gasoline.

One of the proposed modular refineries with a capacity to produce up to 20,000 b/d of 91-octane gasoline could be installed near PDVSA 's Bajo Grande terminal on the west coast of Lake Maracaibo, according to a senior CPV official.

Story by Argus Media
04 08 2020



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