US Treasury extends Venezuela's LPG waiver as calls grow for crude sanctions relief

US companies can export or re-export LPG supplies to Venezuela for another year under a waiver granted July 7 by the Department of Treasury to ease critical shortages of the fuel in the South American country.

A propane shortage in Venezuela has forced many people to turn to wood stoves for cooking food.

Venezuela currently produces about 20,000 b/d of LPG, less than half of its 55,000 b/d local demand. Output has plummeted from 105,000 b/d in 2016, according to an official at state-owned PDVSA, who spoke on condition of anonymity.

The drop in output is a result of damage to gas extraction wells caused by power grid failures.

"Inventories are at critical levels," the PDVSA official said, without giving future details.

The Biden administration's first waiver allowing the flows in July 2021 was seen as a humanitarian move but also a potential sign of intent to ease sanctions on the economically hard-hit country. More substantial sanctions relief around oil sales has yet to materialize, although the Biden administration has recently engaged the Maduro regime in a limited way.

The Treasury waiver, called General License No. 40, allows LPG exports or re-exports to Venezuela through July 12, 2023. It does not allow the suppliers to receive payment-in-kind of petroleum or petroleum products. The previous waiver was set to expire July 8.

Calls for broader relief

The US regularly supplied LPG to Venezuela between October 2011 and January 2019, US Energy Information Administration monthly data shows.

The White House has also been urged to allow Venezuela to restart diesel-for-crude swaps on humanitarian grounds. Before the trades were banned in late 2020, Indian, Spanish and Italian refiners supplied diesel needed for power generation and agriculture in exchange for payment in Venezuelan crude.

International pressure is also growing on the US to consider crude oil sanctions relief on Venezuela to offset declines in Russian supply, and talks for moderate easing of restrictions are possible, according to Platts Analytics, a part of S&P Global Commodity Insights. But President Nicolas Maduro is unlikely to make the concessions needed for full sanctions relief on PDVSA, which could double output to 1.2 million b/d, Platts Analytics said in a June 30 report.

"In any case, technical issues continue to threaten Venezuelan supply growth," Platts Analytics said.