Venezuela had initiated testing of PDVSA transfers oil at Sea despite customer dissatisfaction.
Move crucial to ease backlogs
Venezuela has begun testing seaborne oil transfers to ease a severe backlog of crude deliveries from its main terminals. The chronic delays and production declines if not addressed can lead to halt in contracts.
Customers dissatisfied
The customers certainly miffed and has informed customers that it may declare force majeure, allowing it to temporarily suspend export contracts, if they do not accept new delivery terms, including sea-borne transfers.
The delivery method entails specialized equipment and training and higher costs for ship owners and customers. But PDVSA is pushing ahead over customer doubts given the congestion at its ports and need to complete sales that are the lifeblood of the OPEC member.
Waiting from April
Tankers waiting to load more than 24 million barrels of crude, almost as much as PDVSA shipped in April, are sitting off Jose, the country’s main oil port, according to the data.
The delays helped push up Brent crude oil prices LCOc1 as Brent rose 2.6 percent to settle at $77.32 per barrel.
Testing begins
The trail testing was carried out on the tanker Sonangol Kalandula, bound for a Thailand company’s refinery in Kemaman, Malaysia, and was loaded this week with Venezuelan heavy crude using a ship-to-ship (STS) transfer, the first test of how PDVSA expects to ease congestion at its ports.
Mounting delays
As of June 7, more than 80 tankers were waiting in Venezuelan waters, half of them to load crude and refined products for exports, according to the data.
The delays have mounted since May, when asset seizures forced PDVSA to stop using Caribbean facilities for storing and loading export cargoes. But PDVSA noncompliance with oil supply contracts started months ago as production declines accelerated, according to internal company documents.
In April, PDVSA shipped 1.49 million barrels per day (bpd) of crude and fuels to its customers, 665,000 bpd below the 2.15 million contracted.
Wary of solution
A senior Chinese state-oil official with direct knowledge of the issue said, “The Venezuela side has requested for STS operations, and also agreed to bear the additional cost.”
But the official, who spoke on condition of anonymity said, “I have doubts over whether PDVSA could deliver on time and who would given priority”.
Another buyer of Venezuelan oil said, “Chances were slim that any customer would force contest majeure choosing instead to negotiate differences in pricing because of the transfer costs involved”.
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Source: Reuters
