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Russia’s Rosneft Says Venezuela’s PDVSA Still Owes It $2.3B

Heavy oil

Last year, Venezuela repaid US$2.3 billion of the loan it had received from Rosneft years ago, but the Latin American country still owes another US$2.3 billion, excluding interests, Rosneft said in its 2018 results release on Tuesday.  

Rosneft has extended US$6 billion of loans to PDVSA, which needs to be fully redeemed in crude oil supplies by the end of this year.

As of December 31, 2017, Venezuela’s state oil firm PDVSA had to repay US$4.6 billion of the loan. Through the course of 2018, it reimbursed half of that amount, excluding interests, according to Rosneft’s 2018 financials presentation. As of December 31, 2018, Venezuela still owed Rosneft US$2.3 billion.

Referring to its oil assets in Venezuela, the Russian oil company said that it has participation in five oil projects and holds 100 percent in a gas project, with export rights.

Last week, Dmitry Peskov, spokesman for Russia’s President Vladimir Putin, said that Russia—which stands by Nicolas Maduro in the Venezuelan political crisis—would use “all available legal mechanisms” to defend its interests, including oil interests, in the Latin American country.

According to analysts briefed by S&P Global Platts, whatever the outcome of Venezuela’s political impasse, Rosneft won’t be cut off from Venezuelan oil assets, as oil is pretty much the only hard-currency revenue the country can get. An analyst at a Western bank estimates Rosneft’s assets in Venezuela at up to US$2.5 billion, plus another US$2.5 billion in crude supplies for the loan to PDVSA. Even in the unlikely scenario of Rosneft losing all the money it has poured in Venezuela’s oil, the outcome would be “biting but not critical” for the Russian firm, the analyst told Platts last week.

Related: Wood Mac: Venezuela’s Oil Output To Fall Below 1 Million Bpd

While Rosneft and Russia are left calculating the potential financial losses from Venezuela’s oil, bond holders of PDVSA are also in a difficult position as trading in PDVSA bonds stopped after the U.S. sanctions on the state oil company and its securities.

PDVSA may stop servicing the only bond—notes due in 2020—it has kept on servicing even as it has skipped billions of other bond payments, Francisco Rodriguez, chief economist at Torino Capital in New York, told Bloomberg last week. The 2020 notes are backed by a first-priority lien on a 50.1-percent in PDVSA’s U.S. refining unit Citgo, but Maduro’s regime has no incentive to service the bond since Venezuelan oil-related bank accounts are handed over to opposition leader Juan Guaidó, whom the U.S. and a lot of European nations recognize as the interim president of Venezuela.

By Tsvetana Paraskova for Oilprice.com

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