Venezuela has suspended crude oil shipments to Europe under its “oil-for-debt” program and has demanded fuel from Italy’s Eni and Spain’s Repsol in exchange for continuing to send cargoes to the Old Continent, three sources with knowledge of the subject.
Venezuela’s state oil company PDVSA is no longer interested in the “oil-for-debt” program the State Department approved in May, lifting a two-year ban on sending oil from Venezuela to Europe.
Washington gave the “green light” to the transfer of oil from the Latin American country, as long as the proceeds would be used to pay off PDVSA’s large debt to Eni and Repsol.
“PDVSA wants to return to oil exchanges and that is not yet possible,” a source involved in the delivery of oil cargoes in recent months to Europe told Reuters. “There is zero interest in the oil-for-debt program.”
Oil from Venezuela, particularly cargoes reaching refineries in Spain, has helped Europe cut purchases of Russian oil after the invasion of Ukraine. But the terms of the deal have not brought cash or fuel to PDVSA, whose refineries are scrambling to produce gasoline and diesel after years of underinvestment.
PDVSA, Eni, Repsol and the US State Department did not immediately respond to a Reuters request for comment.
According to PDVSA’s shipping schedule, there are no cargoes to be delivered to Eni or Repsol in August, even though stocks of diluted crude oil (DCO) at the port of Jose increased to around 5 million barrels as of August 8.
According to the same sources, PDVSA wants to receive fuel in exchange for its crude, while using part of the value of the cargoes to offset billions of dollars in debt owed to the joint venture partners, including Chevron, Eni and Repsol.
Reshaping the deals could help Venezuela’s state-owned company revive its heavy crude oil business, since it needs to import diluents, and reduce the country’s motor fuel deficit.
Since last year, PDVSA has relied primarily on Iranian diluents to convert its heavy crude into exportable grades.
Since June, Eni has received a total of 3.6 million barrels of diluted Venezuelan crude oil (DCO), according to PDVSA documents and tanker tracking data. Most of this quantity was later delivered by Eni to Repsol, which has more capacity to refine the South American country’s heavy grades of crude.
Repsol CEO Josu Jon Imaz said in late July that the return of Venezuelan cargoes to the market was “good news” for its refiners, as the quality of the crude in question perfectly matched its refining system.
The resumption of oil shipments to Europe helped PDVSA increase its sales in June and July, with total exports reaching 545,000 barrels per day.
Operational issues then offset the increase in exports. However, PDVSA plans to restart a third heavy crude upgrader, in the Petromonagas consortium, which will boost crude production and export capacity.