Venezuela loses three oil supertankers to its Chinese partner

A shipping joint venture between Venezuela and China has fallen apart in the wake of US sanctions, reports Reuters. As a result, Venezuela has lost three VLCCs – Junin (IMO 9623269), Boyaca (IMO 9590058) and Carabobo (IMO 9623257)– court documents show. The transfer of the VLCCs had not been previously reported.

PetroChina Co Ltd, previously Venezuela state-run Petroleos de Venezuela’s  partner in the Singapore-based joint venture CV Shipping Pte Ltd, took control of the three tankers between January and February, according to documents from a Singapore court reviewed by Reuters.

US sanctions on PDVSA made the vessels uninsurable on the international markets, leading to millions of dollars in losses for CV Shipping and prompting PetroChina to place it in bankruptcy. The original purpose of the venture was to ship Venezuelan oil to China and some other export destinations.

The sanctions caused a sequence of crises at the venture. Standard Club revoked P&I cover for the vessels in May 2019, letters included in the court records show.

CV Shipping’s insurance broker, Willis Towers Watson, explained in an email included in the case file that Standard Club made that decision because “it did not want to be exposed to the risk of being or becoming subject to sanctions.”

Singapore law requires vessels to have P&I insurance to set sail, meaning that the tankers effectively could not sail, according to an affidavit written by a PetroChina lawyer.

CV Shipping’s banks froze the company’s accounts, and the vessels’ ship managers warned they would soon cancel their contracts, the affidavit read. CV Shipping found itself losing $500,000 a month on the vessels.

To stem those losses, in June 2019 PetroChina proposed ending the CV Shipping venture and splitting the four vessels between the two firms. PDVSA had taken over management of the Ayacucho in June 2019 while it was in Venezuelan waters, according to a notice to its previous manager included in the docket.

Xia described this move as “unilateral” in a June 28th 2019 email to PDVSA executives, but nonetheless proposed the company keep the vessel and the Carabobo, leaving the Junin and the Boyaca to PetroChina.

Shares in the Ayacucho and Junin were transferred to PDVSA and PetroChina, respectively, on January 17th 2020.

PDVSA paid $17.8m for shares in the Ayacucho while PetroChina paid $13.8m for the Junin shares, according to a sale and purchase agreement included in the court docket. The payment was deducted from loans the shareholders had made to the venture.

But the two parties were unable to reach a deal for the remaining two vessels, prompting PetroChina to request that CV Shipping be placed in liquidation. The Singapore courts agreed. The appointed liquidator proposed an auction of the remaining two tankers between the two companies, and asked both parties to provide proof of funds, which PDVSA said it could not do because of the sanctions.

Oswaldo Vargas – who ran PDVSA’s maritime subsidiary, PDV Marina – wrote to the liquidator on February 22nd this year that “due to force majeure, expressed in the unilateral coercive measures imposed by the Government of the United States of America on our behalf, which is public and recognized, we are not able to indicate a bank account”. Vargas was removed from the company in March and arrested by Venezuelan authorities on allegations of complicity with fuel smuggling.

The liquidator, acting on CV Shipping’s behalf, subsequently reached a deal in a private negotiation with PetroChina to sell the shares in the Carabobo and Boyaca, for 1 Singapore dollar each, after PetroChina agreed to pay off the inter-company debt the two vessels’ parent companies owed to CV Shipping for around $53m total. Petrochina made those payments on February 26th.

2015-built, Singapore-flagged, 167,572 gt Junin is owned by Junin Shipping Pte care of manager SPC Shipping Pte of Singapore. ISM manager is Nortnern Marine Management of Singapore. It is entered with Standard Club (incepted 21/7/20) (Standard Asia Division) on behalf of Beijing Sanhe Youcheng Technology & Trade Co.

2014-built, Singapore-flagged, 167,572 gt Boyaca is owned by Boyaca Shipping Pte care of SPC Shipping Pte, Singapore, ISM manager is Nortnern Marine Management Pte of Singapore. It is entered with Standard Club (incepted 21/7/20) (Standard Asia Division) on behalf of Beijing Sanhe Youcheng Technology & Trade Co.

2014-built, Singapore-built, 167,572 gt Carabobo is owned by Carabobo Shipping Pte care of manager SPC Shipping Pte of Singapore. ISM manager is Bernhard-Schulte Cyprus of Limassol, Cyprus. It is entered with Standard Club (incepted 21/7/20) (Standard Asia Division) on behalf of Beijing Sanhe Youcheng Technology & Trade Co.