Home > Chemical News

Chemical News

CERAWeek: Citgo can weather shock of PDVSA sanctions, says chairwoman

http://www.chemnet.com   Mar 13,2019 S&P Global Platts
US sanctions on Venezuela have halted Citgo's primary source of crude for its US refineries, but will not significantly slow the company's operations, Citgo's new chairwoman Luisa Palacios said Tuesday.

"It's a shock, but it's one that we are very well placed to weather," Palacios said during an appearance at CERAWeek by IHS Markit in Houston.
Citgo, which is in the process of cutting ties with PDVSA, its parent company, in order to avoid violating US sanctions, has been developing contingency plans "for months" in preparation for sanctions, Palacios said.

Citgo imported about 176,000 b/d of Venezuelan crude before sanctions on PDVSA were imposed and has a diverse stream of crudes, Palacios said. The company imported 68 different types of crude from 19 different countries last year, she said.

Roughly 66% of Citgo's crude is sourced in North America, the majority in the US, she said.

However, she said Venezuelan crude was the "optimal blend" for Citgo's refineries, adding the company will be well set to continue imports from Venezuela once President Nicolas Maduro is removed from power and US sanctions are lifted.

"Overall, we continue to be the perfect place in terms of synergy and a natural fit for Venezuelan crudes when the transition takes place," Palacios said.

The US, and numerous other countries, recognize opposition leader Juan Guaido as Venezuela's legitimate president.

But even if sanctions are lifted quickly, it could take several years before Venezuelan oil production rebounds moderately, said Ashok Belani, executive vice president of technology with Schlumberger.

"There hasn't been investment for a long period of time," he said.

Ricardo Hausmann, an adviser to Venezuela's opposition government, said Tuesday that the transition will include the creation of a new hydrocarbons law, which will allow private companies to both partner with PDVSA and to directly invest in oil and gas production projects.

Companies with current investment arrangements in Venezuela's oil sector will be grandfathered into the new system, Hausmann said.

With a lack of drilling rigs and personnel, no storage facilities and a lack of spare parts, recovery of the country's oil sector will take a massive cash injection and years, Belani said.

"This is not reviving a field, you're almost rebuilding an industry," he said. "That's a lot of work before you get that first uptick."

Venezuelan output has fallen below 1 million b/d and may have fallen as low as 600,000 b/d this week during widespread power outages in the country, Belani said.

S&P Global Platts Analytics forecasts that US sanctions will cause Venezuelan crude output, which averaged 1.2 million b/d in January, to fall to 825,000 b/d in the fourth quarter of this year and then fall further to average 750,000 b/d in 2020.

Venezuela produced 1.10 million b/d in February, down 60,000 b/d month on month, according to an S&P Global Platts survey released last Thursday. On Monday, the US Energy Information Administration forecast that Venezuelan crude output fell below 1.1 million b/d in February, down from 2.3 million b/d in February 2016.

On January 28, the US unveiled sweeping sanctions on PDVSA, Venezuela's state-owned oil company, setting an immediate ban on US exports of diluent to Venezuela and requiring payments made to PDVSA to be through blocked accounts, setting up a de facto ban on US imports of Venezuela crude.

The US has also announced that transactions between non-US firms and PDVSA that involve the US financial system or US commodity brokers would be prohibited after April 28.
 Print  |    add to Favorites  |    Close