A total of $26 million in unpaid bills has caused Venezuela's PDVSA to be blocked from using a NuStar Energy oil storage terminal in the Caribbean, according to an exclusive report by Reuters.
The facility, located on St. Eustatius island, has not received payment from PDVSA for its services for nearly a year. NuStar has since refused to retrieve PDVSA's oil that was supposed to be delivered to an oil trader.
Quality control issues have also jeopardized Caracas' credibility in international circles, which compromises the Venezuelan government's already limited ability to provide imported goods for its citizens, which include day-to-day and medicinal supplies.
PDVSA had expanded its contract to store crude with NuStar earlier this year, after a deal with Buckeye Partners in the Bahamas fell through due to an unrelated payment dispute.
Venezuela has been a major proponent of extending and expanding the scope of the Organization of Petroleum Exporting Countries' (OPEC) November agreement to cut bloc-wide output by 1.2 million barrels per day. The three-year stretch of low oil prices has destabilized the country, which is now plagued with protests against President Nicolas Maduro.
Venezuela's Indian, Chinese, and American clients are complaining that crude shipments from PDVSA are poor in quality, causing demands for discounts and returned shipments, according to a recent report by Reuters, including interviews with over a dozen sources and supporting documents.
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The disputes allege that the crude oil is contaminated with water, soil, and other minerals that make it difficult for refineries to effectively process crude for mass consumption.
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.
"We're refitting chemical injection points, recouping pumps and storage tanks," one PDVSA worker told Reuters. "But without chemicals, we can't do anything."
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More
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Result will be bullish.