Singapore — A drop in crude oil supply from Venezuela is forcing China's independent refiners to look for alternative source of heavy crude, with Mexican Maya, Colombia's Castilla and Canadian Cold Lake Blend options being considered, sources said.
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Independent refiners are major end-users of Venezuelan crudes, taking around 69% of the Latin American shipment to China, mainly through CNPC, which is the solo buyer under the oil-for-loan deal between the countries. China imported 4.7 million mt crude from Venezuela in Q1, out of which 3.22 million mt was taken by the independent refiners, data from the General Administration of Customs and S&P Global Platts showed.
But Venezuela's PDVSA has notified eight international customers, including CNPC, it will not be able to meet its full crude supply commitments in June, a PDVSA official told S&P Global Platts on Monday.
The official said PDVSA is contractually obligated to supply 1.495 million b/d to those customers in June, but only has 694,000 b/d available for export.
Venezuelan crudes are mainly used for asphalt production in China, the demand for which peaks over September-November.
"We need to adjust our supply plan and find other crudes as feedstock for producing asphalt to make up the shortfall from Venezuela," a CNPC source, who traded crude for the independent sector, said Tuesday.
He said it is difficult to find good alternatives for Venezuelan Merey crude, which with an API of 16 degrees and 2.46% sulfur content and is a good feedstock for asphalt production.
Independent refineries took 4.68 million mt of Merey shipments over January-May, accounting for 88% of all Venezuelan arrivals for the sector, a Platts survey showed.
Some heavy crudes, like Maya from Mexico, can be used as an alternate to produce asphalt, a source with independent Wonfull Petrochemical said. Maya has an API of around 21 degrees and sulfur content of around 3.66%. But no crudes have been imported from Mexico by independent refineries since 2016.
"Some refineries have tried to use Castilla crudes from Colombia to produce asphalt, but this is not as good a feedstock as Merey," said the Wonfull source.
Castilla has an API of 19.25 degrees and sulfur content of around 0.7%.
A source from Chambroad said the company would consider taking heavy crudes from other regions, like Cold Lake Blend from Canada, which has similar quality with Merey. Cold Lake Bland has an API of around 21 degrees and sulfur content of around 3.75%.
Sinopec has been using Kuwait crude to produce asphalt. Kuwait crude has an API of around 31 and sulfur content of around 2.52%, but KPC usually sells barrels via term contracts, while independent refiners typically buy from the spot market.