Venezuela's oil delivery contracts could suffer 50% haircut

Venezuela's oil delivery contracts could suffer 50% haircut

PDVSA's tumbling crude production, chronic breakdowns of its heavy crude up-graders and difficulty importing critical light crude and naphtha are progressively reducing the amount of oil available for export, Argus said.

As of June 6, over 80 tankers were waiting in Venezuelan waters, half of them to load crude and refined products for exports, according to the data.

If they do not accept the terms, PDVSA is considering force majeure, in essence declaring its contracts incapable of being fulfilled, the sources familiar with the matter said.

In April, the company shipped 1.49 million bpd of crude and fuels to its customers - 665,000 bpd below the 2.15 million bpd contracted, the documents show.

One of PDVSA's Indian customers confirmed it had received a request to load its cargoes via ship-to-ship transfers.

The OPEC member's export terminals have grown overcrowded since ConocoPhillips last month won court orders freezing PDVSA's key Caribbean operations, where the company used to ship large cargoes to Asian destinations.

There were more than 70 tankers off the coast of Venezuela on Tuesday, according to Thomson Reuters vessel tracking data.

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PDVSA did not reply to requests for comment.

Venezuela's exports of crude declined 28 percent in the first four months of 2018 to 1.19 million bpd compared with 1.65 million bpd in the same period last year, according to Reuters trade flows data.

The delays have mounted since May, when asset seizures forced PDVSA to stop using Caribbean facilities for storing and loading export cargoes.

These transfers require specialised equipment, handling by specialists and facilitated by mooring masters, according to a provider of the service.

Venezuela is engulfed in a severe political crisis and economic meltdown, with oil production declining and the sector in chaos amid corruption, a brain-drain, and U.S. financial sanctions making shipments and transactions ever more difficult. The captain of the receiving tanker also had to be trained to perform the operation, a shipper said. Additional costs for completing the transfer also contributed to the refusals. PDVSA will still have to load vessels at its Jose port for transporting the crude to its proposed offshore loading facility. "The question is who will take responsibility for that", said Robert Campbell, head of oil products markets at consultancy Energy Aspects.

Crude spills affecting the waters surrounding several PDVSA's ports at Venezuela's western coast is another risk some customers see as an obstacle for the transfers.