Venezuela halts most oil exports

The new Chief Executive of Venezuela’s state oil company PDVSA – Pedro Rafael Tellechea – has suspended most oil export contracts, reports Reuters, citing an internal document it had seen and unnamed people familiar with the matter.

PDVSA is reviewing the contracts in a move to avoid payment defaults, the report claimed.

Since US trading sanctions were first imposed on PDVSA by the previous US administration in 2019, the company increasingly resorted to middlemen to allocate its oil exports. That led to big price discounts and problems with payments, which in turn affected PDVSA’s cashflow. However, the latest freeze order has led to delays at port delays; vessels that were already loading have been sent away and were waiting for new orders, the sources said.

Tellechea last week wrote to the heads of the company’s divisions of supply and trade, domestic market, international market, finances and foreign affairs and notified them of the contract suspensions. He did not specify how long the suspension would last.

Tellechea was appointed to PDVSA on January 6th by President Nicolas Maduroalong, with eight new vice presidents. The suspension so far has mainly affected the little-known firms that have been acting as middlemen in PDVSA’s sales to Asian refiners.

Cargoes chartered by US oil firm Chevron Corp and Cuba’s Cubametales have not been affected by the contract revision, according to separate documents and the sources.

As of January 17th most berths at Venezuela’s main oil terminal, Jose port, were empty. More than a dozen vessels were at the anchorage area awaiting instructions. At other terminals some ship-to-ship transfers were interrupted. Some customers were apparently instructed to prepay cargoes entirely before delivery, the people said.

PDVSA’s previous administration last year had imposed new contract terms to its spot customers, demanding prepayment of a least half of the cargoes’ value. That strategy was to avoid tankers setting sail without proper payment, which had hit Venezuela’s finances in recent years.

Although a few oil customers are currently authorized by the US to trade Venezuela-origin cargoes without threat of sanctions (including Chevron, Italy’s Eni and Spain’s Repsol) most PDVSA clients remain firms with no track record of trading and no credit guarantees. The US government has said that many of these firms are shell companies, thus concealing the identity of the real buyer.