O-I Glass Inc, a glass manufacturer, is trying to seize a Venezuelan oil tanker as part of efforts to secure the $500 million in arbitration compensation granted it by a court after Venezuela expropriated two plants, Reuters reports, citing documents filed at a Singapore court.
This is the latest in a series of attempts by various companies to collect compensation that courts had granted them after the sweeping nationalization of private businesses undertaken by late Hugo Chavez. And with options few, oil tankers are among the first ones to attract attention.
If the court grants O-I Glass its request, it would spell more trouble for already struggling PDVSA, Venezuela’s state oil firm. The company has been the main target of U.S. sanctions, the latest round focusing on tankers. The sanctions were reportedly to cover all vessels that have called at Venezuelan ports over the 12 months to end-May, prompting many shipping firms to divert vessels that were already en route to Venezuela.
The targeting of vessels naturally includes oil tankers, so PDVSA has had to rely on its own fleet of vessels to continue shipping crude oil abroad for vitally needed cash. Even so, exports have collapsed from 1.5 million bpd before the start of sanctions to just 400,000 bpd, according to Reuters. This is the lowest level of oil exports in more than 70 years.
Meanwhile, drilling rigs have been removed from Venezuelan oil fields as well. According to the Baker Hughes rig count report, as of June, there was one active drilling rig in the country. However, after Chevron folded up and left, pressured by the sanctions, its contractor Nabors Industries followed, leaving it with zero active rigs.
PDVSA saw its June production plunge by 32 percent, with output in the country holding the world’s largest oil reserves plummeting to its lowest level in 75 years in early June when it was just 374,000 bpd.
By Charles Kennedy for Oilprice.com
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Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London