India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues

Venezuela’s Indian, Chinese, and American clients are complaining that crude shipments from PDVSA are poor in quality and are resulting in demands for discounts and returned shipments, according to a new report by Reuters, including interviews with over a dozen sources and supporting documents.

The disputes involve the contamination of crude with water, soil, and other minerals that make it difficult for refineries to effectively process crude for mass consumption. 

But the sources speculated that the low quality of shipments was due to lack of upkeep at PDVSA facilities as officials try to cut corners to save operating costs. In addition, the state-owned company lacks the resources to buy chemicals that aid in the long-term storage of crude before shipment. 

American refiner Phillips 66 has cancelled at least eight shipments totaling 4.4 million barrels in the first half of the year due to the low quality of crude coming in from Venezuela, official PDVSA documents show. 

The China National Petroleum Company (CNPC) complained this year that Venezuelan shipments had been excessively diluted with water, while India’s Reliance Industries complained of other quality issues, according to current and former PDVSA employees. 

“We’re refitting chemical injection points, recouping pumps and storage tanks,” one worker told Reuters. “But without chemicals, we can’t do anything.” 

Another employee indicated the deterioration of Venezuelan crude quality began as early as two years ago, but acute budget shortfalls in recent months accelerated the issues.

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PDVSA’s issues are twofold: logistical and political. In the U.S., Senators have been pressing the Trump Administration to review the chances of Russia’s Rosneft acquiring Venezuela’s PDVSA and its U.S. business, Citgo. Marco Rubio and Bob Menendez believe a change in the ownership of Citgo’s assets would constitute a security risk, Reuters reported last month.

The White House has already authorized sanctions against Caracas and PDVSA, based on the continuation of President Nichols Maduro’s regime despite severe protests by Venezuelans over the past year. 

By Zainab Calcuttawala for Oilprice.com

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