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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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PDVSA Could Declare Force Majeure On Oil Exports

Venezuela’s state oil company may be forced to announce a force majeure on crude oil exports if clients awaiting delivery continue to refuse to accept new contract terms the company has proposed as a means of coping with a tanker build-up at its two biggest export terminals, Reuters reports, citing sources close to developments.

There are more than 70 tankers waiting to load at Venezuelan ports, but not all of these ports are fit to load larger vessels. So, PDVSA has offered buyers to move the large vessels to its deepwater port of Paraguana and load them by using ship-to-ship transfer.

The build up of tankers waiting for Venezuelan crude followed ConocoPhillips seizing PDVSA assets in the Caribbean, including terminals from where PDVSA sent cargoes to Asia.

The Venezuelan company has asked several Asian clients if they would agree to a ship-to-ship transfer, but they have declined, according to the Reuters source, on the grounds that there will be no third party to supervise the loading. Also, ship-to-ship transfers would produce additional costs for the buyers, traders told Reuters.

According to the Venezuelan source, however, “Many customers are going to prefer this than continuing to accumulate demurrage,” that is, longer waiting times to load. If they don’t however, PDVSA would be forced to declare force majeure. Related: The Nuclear Reactor That Makes Its Own Fuel

Earlier this week, an employee of the company told S&P Platts that PDVSA has told eight foreign clients it will be unable to supply the contracted volumes of crude oil. "Among the affected clients due to the low availability of crude to export are Nynas, Tipco, Chevron, CNPC, Reliance, Conoco, Valero, and Lukoil, which will partially receive the volumes established by the contracts," the person said.

Plagued by mismanagement, corruption, and most recently a lack of investment money under the double weight of U.S. sanctions and lower oil prices, PDVSA has seen its production plummet over the last couple of years. S&P Platts estimates this plunge has wiped out as much as 900,000 bpd from the company’s daily production, with the latest daily average standing at 1.41 million bpd in April.

By Irina Slav for Oilprice.com

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Leave a comment
  • Kr55 on June 06 2018 said:
    Once in a lifetime chance for Canada to steal a customer for heavy crude. Oops, they were too dumb to build the needed export capacity.
  • Tom Kirkman on June 06 2018 said:
    Clearly, PDVSA do not understand the actual definition of "Force Majeure".

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