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PDVSA offers spot crude for March following US sanctions

PDVSA is offering 5.8 million barrels of crude oil and diluted spot crude because of US sanctions, according to sources and PDVSA tenders.

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Traditional customers of Venezuelan crude grades, such as Merey 16, Boscan, Bachaquero and diluted crude oil, did not submit bids for nine shipments scheduled between March and June.

"Lukoil Panamericas LLC did not submit bids for three oil shipments of 400,000 each [of] Boscan. Lukoil also did not submit offers for another three shipments of 400,000 barrels each of Bachaquero crude," said a market source close to the negotiations. "Due to the fact that Lukoil did not make any offer for the Boscan and Bachaquero crude, the rejection of the price negotiation for the April-June 2019 period by Lukoil is recorded," the source added.

Lukoil's rejection leaves PDVSA free to look for other buyers, the source said.

Russia's Rosneft also failed to bid for 1.5 million barrels of Merey 16 crude and 1.5 million barrels of DCO.

"These shipments are included in the contracts signed between PDVSA and Lukoil for the payment of debts, which in addition to crude include refined products," said a PDVSA official responsible for monitoring the contracts. "For these shipments previously committed to Rosneft, PDVSA activated the backup procedure clause, which allows it to place the crude oil with other customers in the volumes corresponding to March," said the source.

PDVSA will also carry out a tender to offer a shipment of 400,000 barrels of Boscan crude, which must be loaded at the Bajo Grande terminal in western Venezuela. Originally this crude was assigned to Chevron as payment for loans and to provide cash flow for PDVSA. Chevron had a 40:60 joint venture with PDVSA the Boscan field, located in western Venezuela, but updated data on Boscan field production is not available.

Bachaquero and Boscan are heavy crudes of 11.8 degrees API and 2.88% of sulfur and 10.8 degrees API and 4.77% of sulfur. Merey 16 is an upgrader crude, diluted with light crude oil of 16.4 degrees API and 2.99% sulfur. DCO is an upgrader crude diluted with naphtha of 16.5 degrees API and 3.25% of sulfur.

The administration of US President Donald Trump unveiled sanctions on PDVSA January 28 that served as a de facto ban on US crude imports of Venezuelan oil and an immediate ban on US exports of diluent to Venezuela. The new sanctions require any payment for crude from PDVSA to be deposited into blocked accounts within the US. The funds would ultimately be transferred to a new Venezuelan government, led on an interim basis by Juan Guaid?, if and when Nicol?s Maduro relinquishes power.

On February 1, the US Treasury also gave non-US companies three months to wind down transactions with PDVSA that involve the US financial system, essentially prohibiting sales of PDVSA crude and products in dollars.

-- Staff report, newsdesk@spglobal.com

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