Venezuela's PDVSA mulling force majeure on oil exports -sources

Venezuela's President Nicolas Maduro raises a finger as he is surrounded by supporters while speaking during a gathering after the results of the election were released outside of the Miraflores Palace in Caracas Venezuela

Venezuela's President Nicolas Maduro raises a finger as he is surrounded by supporters while speaking during a gathering after the results of the election were released outside of the Miraflores Palace in Caracas Venezuela

Venezuela's state-owned oil firm PDVSA is considering a declaration of force majeure if customers do not accept new contract terms to ease a bottleneck of tankers around its two main export ports, according to three sources familiar with the matter.

PDVSA's tumbling crude production, chronic breakdowns of its heavy crude up-graders and difficulty importing critical light crude and naphtha are progressively reducing the amount of oil available for export, Argus said.

Crude futures +0.1% to $65.58/bbl.

Maintenance will last through the end of June and PDVSA clients that reject new deals with supply haircuts could see all of their Venezuelan supplies suspended until the circumstances obliging PDVSA to declare force majeure are resolved, one of the PDVSA officials told Argus.

In April, the company shipped 1.49 million bpd of crude and fuels to its customers - 665,000 bpd below the 2.15 million bpd contracted, the documents show. Nayara Energy, Valero Energy and units of CNPC, which each had vessels awaiting loadings on Wednesday, did not reply to a request for comment.

The lack of export and storage terminals, especially those with deep-water docks to load large vessels bound for Asia, has forced PDVSA to divert tankers to Venezuela in recent weeks.

Most customers have so far refused the ship-to-ship transfer request due to the lack of a third party supervising the operations, according to shippers and traders.

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These transfers require specialised equipment, handling by specialists and facilitated by mooring masters, according to a provider of the service.

Venezuela's crude exports fell 6% in May to 1.168-million barrels a day following US ConocoPhillips' legal actions to seize PDVSA's assets in four Caribbean islands, according to the data.

But the official, who spoke on condition of anonymity, said he had doubts over whether PDVSA could deliver on time and who would be given priority. The nation's crude exports in the first five months of 2018 were 27 percent lower than in the same period of 2017.

"A STS operation adds at least $1 a barrel to the purchase cost".

Insurance coverage for tankers and cargoes would also have to be changed to include the STS operation if customers accepted the option, Campbell added. PDVSA will still have to load vessels at its Jose port for transporting the crude to its proposed offshore loading facility.

Crude spills affecting the waters surrounding several PDVSA's ports at Venezuela's western coast is another risk some customers see as an obstacle for the transfers.

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