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PDVSA prepares fuel rationing program as US sanctions hamper imports: sources

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PDVSA prepares fuel rationing program as US sanctions hamper imports: sources

Highlights

US sanctions bite harder; PDVSA eyes 58% gasoline shortfall, 71% diesel shortfall

Rosneft only willing supplier in 2019; PDVSA will apply rationing if that changes: source

March refined products demand to average 355,000 b/d, 68% above 2019 deliveries

Caracas, Venezuela — Venezuela's PDVSA is preparing a fuel rationing plan for domestic consumers as the state-owned company confronts a shortfall of refined products and the consequences of US sanctions on production and trading activities, according to sources.

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Staring at a 58% shortfall in gasoline and a 71% shortfall in diesel and as US sanctions bite increasingly harder, PDVSA is preparing a rationing plan that could take effect in the next few weeks, according to sources and local media reports.

"The supply of strategic fuels to the national market is the priority at the moment," according to a PDVSA official who spoke with S&P Global Platts on the condition of anonymity.

"In February and March, we expect local demand for 95 and 91 octane gasoline will be 217,000 b/d and diesel consumption to average 110,000 b/d," the official said.

Preliminary PDVSA figures reviewed by Platts indicate average gasoline production for the whole of 2019 was 72,000 b/d, while consumption averaged 142,000 b/d. Imports averaging 70,000 b/d made up the difference.

When it comes to diesel, another strategic fuel for PDVSA because it is used to fuel electricity generation, the national refining system's output in December averaged only 15,000 b/d. Consumption nationwide in 2019 averaged 62,000 b/d.

Gasoline and diesel production has been inconsistent and in decline because of the progressive deterioration of Venezuela's refining system, which overall is currently operating at only 15% of its installed capacity.

The 645,000 b/d Amuay facility is the only Venezuelan refinery currently operating, and even that is only running at 130,000 b/d or 20.2% of its capacity. The company's other three refineries – the 310,000 b/d Cardon, 140,000 b/d El Palito and 187,000 b/d Puerto La Cruz facilities – are shut due to extensive, regular problems with the processing units, failure to obtain electricity supplies and a shortage of crude to process.

"The stability of fuel supply for the national automotive market and the ability to meet domestic demand for fuels that supply the electric power industry currently depends principally on purchases from Russia-based Rosneft, and in smaller measure from other companies," the official said.

On Wednesday, Venezuelan President Nicolás Maduro instituted a restructuring of PDVSA as well as declaring an energy emergency in response to the US announcing sanctions earlier this week against Rosneft.

To carry out the decrees, Maduro created a commission headed by his economy vice-president Tareck El Aissami that includes other cabinet ministers such as defense chief Vladimir Padrino and petroleum minister Manuel Quevedo, who is also PDVSA's president.

"In the past four months, PDVSA has bought fuel in excess of real domestic consumption rates with the intention of keeping inventories full and having some room to maneuver should there be a short-term emergency," said another PDVSA official who is a member of the presidential commission's technical team.

Precise information about fuel inventory totals was not available Friday.

ROSNEFT

To ensure domestic supplies of fuel continued to be available as well as making sure other refined products were supplied to local refineries, PDVSA and Rosneft inked deals in 2019 involving the exchange of crude produced in Venezuela for refined products obtained by Rosneft.

"Rosneft was the only supplier to indicate it was willing to work in the current circumstances and guarantee (fuel) supplies in 2019. We hope that this support continues in 2020, but if it is not possible, we will apply a rationing plan until we see a partial recovery in local refining capacity," the first official said.

According to an internal report, Rosneft supplied PDVSA with a total of 4.5 million barrels of 95 RON gasoline and 700,000 barrels of MTBE in November and December.

No gasoline import figures were available for January and February.

Official figures reviewed by Platts indicate that demand for refined products in March will average 355,000 b/d, a 68% increase compared with actual 2019 deliveries. The increase in demand is due to the replacement of inventories and need to increase stocks, according to the figures.

However, whether imports continue is uncertain given the escalation of US sanctions against the Maduro regime and his allies.

The US imposed sanctions on Rosneft Trading SA, the Geneva-based subsidiary of the state-owned Russian oil company, on Tuesday for supporting Venezuela's oil sector by continuing to trade with PDVSA, concealing shipments and handling more than half of the country's oil exports, it said.

According to internal PDVSA documents seen by Platts, PDVSA is expecting two shipments from India-based Reliance in February and March, one containing 260,000 barrels of ULSD and another of 260,000 barrels of 0.1% sulfur diesel.

The price negotiated for the ULSD was front-month ICE gasoil futures plus $111/mt for one Venezuelan port and plus $118/mt for two ports, according to the documents.

In addition, Italy's ENI is expected to deliver a 250,000 barrel shipment of ULSD with a base price of Platts Mediterranean CIF (MID) 10 ppm ULSD plus $50/mt.

Rosneft is expected to deliver a shipment of 240,000 barrels of 0.5%S diesel for a price of front-month NYMEX heating oil plus 24 cents/gal.

None of the companies involved in the transactions could be reached immediately for comment Friday.