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PDVSA seeks 2.96 million barrels of refined products for September: company report

Caracas, Venezuela — Venezuelan state-owned PDVSA is seeking 2.96 million barrels of refined products and naphtha for September delivery, in order to compensate for low refinery runs and to maintain oil production, according to a company report seen by S&P Global Platts Monday.

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PDVSA is looking to purchase 600,000 barrels of 95 RON gasoline blendstock, 600,000 barrels of 91 RON gasoline blendstock, 300,000 barrels of low sulfur diesel, 240,000 barrels of 0.5% sulfur diesel, 240,000 barrels of MTBE, 240,000 barrels of alkylate, 240,000 barrels of VGO, and 500,000 barrels of heavy naphtha.

PDVSA's refineries are operating well below capacity, causing shortages of refined products. While drivers are able to fill up with gasoline in Caracas, Venezuela's capital, the rest of the country is experiencing fuel shortages.

For instance, PDVSA's 955,000 b/d Paraguana Refining Center (CRP) was operating at just 85,000 b/d September 5, or 8.9% of capacity, due to unstable electricity supply and lack of crude to process.

Located in northwestern Venezuela, CRP includes the 645,000 b/d Amuay refinery and 310,000 b/d Cardon refinery, and is the largest refining complex in Venezuela.

PDVSA's 187,000 b/d Puerto La Cruz and 140,000 b/d El Palito refineries are shut.

PDVSA also needs naphtha for blending to maintain oil "production operations in the Orinoco Belt," the internal report said.

Venezuela produced 700,000 b/d of crude in August, down from 730,000 b/d in July, and 2 million b/d in January 2017, according to an S&P Global Platts survey.

PDVSA acknowledged its difficulties in obtaining refined products and maintaining crude output because of US sanctions on Venezuela.

In the report seen by Platts Monday, PDVSA said it was making adjustments to its trading strategy in the hopes of lowering the cost of imported refined products and naphtha.

"Due to the US sanctions, traditional clients have terminated their commercial relationship with PDVSA and shipping agencies and ship-owners refuse to allow their vessels to reach Venezuelan coasts and ports," the report said.

"The company is in a situation of vulnerability to negotiate imports whose cost has increased excessively to the detriment of PDVSA," the report added.

The report recommended, for instance, accelerating trading processes, designing a plan to reduce the countries reliance on imports, and calculating internal demand for fuels. The report also suggests PDVSA should continue to pay for refined products with Merey 16 crude.

However, it is unclear if any of the reports' recommendations will help PDVSA obtain refined products, considering its main obstacle is finding trading partners willing to risk breaking US sanctions.

Trading has become more risky following the most recent round of sanctions imposed by US President Donald Trump in early August, which blocked business activities by individuals or entities deemed to have supported the Venezuelan government.

"I think third parties are extremely nervous about the possibility of enforcement action from any interaction that they have with PDVSA, following the August 5 executive order," said Andrew Stanley, an associate fellow at the Center for Strategic & International Studies' energy and national security program. "Beyond a small number of parties from China, Cuba, and Russia (and a few others where waivers apply) it is hard to see many other actors willing to engage in business with PDVSA, given the risks involved."

In August, PDVSA received 3.24 million barrels of refined products from Russia's Rosneft, according to other PDVSA reports seen by Platts. That was down from the 4.849 million barrels Rosneft reportedly supplied PDVSA in July.

Neither PDVSA nor Rosneft could be reached for comment.

Rosneft is a partner in multiple projects with PDVSA, including PetroMonagas, PetroVictoria, Boqueron, PetroMiranda, and offshore projects on the Paria peninsula.

-- Newsdesk-Venezuela, newsdesk@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com