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Oil Soars On Crude Inventory Draw

Oil Soars On Crude Inventory Draw

Oil prices rose on Wednesday…

Crisis Stricken PDVSA Restarts Crucial Oil Blending Plant

PDVSA

Venezuela’s PDVSA and its partner CNPC have restarted operations at their jointly operated Sinovensa project, where an oil blending plant was shut down last week because of the buildup of excessive stocks, Reuters reports, quoting a person familiar with the matter and an internal document.

Excessive stockpiles of crude are one of Venezuela’s problems caused by U.S. sanctions targeting its oil company. Now these must have gone down so the Sinovensa blending plant, which is near Venezuela’s largest oil export terminal, the port of Jose, is operating again.

The plant blends superheavy from the Orinoco Belt with light crude to produce the popular Merey blend. According to the document Reuters said it had seen, the facility produced 105,000 barrels of Merey crude on Tuesday. This is Venezuela’s total Merey blend production since there are no other blending plants in operation at the moment.

Yet PDVSA is building a new one, financed by China, according to an IHS Markit report from August. The new blending facility would have a daily capacity of 120,000 barrels, to add to the current Sinovensa capacity of 100,000 bpd.

Sinovensa is 49-percent owned by the Chinese state giant and 51-percent owned by PDVSA. In August, Venezuela’s President Nicolas Maduro said that with the help of its Chinese partner, PDVSA planned to boost the capacity of the Sinovensa plant by 65,000 bpd.

“Thanks always to China, for all of this effort and all of this cooperation,” Maduro said at the time. He added that this will be the first of two production expansions, the second of which should bring production to 230,000 bpd.

The Merey blend is particularly popular among Asian refiners and since these are Venezuela’s biggest clients right now, the plan to boost the production capacity for the blend is understandable. However, a recent report suggests the financial side of matters could be tricky: a Chinese company hired for the original plant’s capacity expansion had stopped work on the project due to payment delays.

By Irina Slav for Oilprice.com

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