Shipping companies have become increasingly reluctant to supply Venezuela with vessels to ship its crude oil to foreign markets for fear of losing their insurance, Bloomberg reports, citing unnamed sources in the know.
Tighter U.S. sanctions against Caracas have spread to the shipping industry, which faces loss of insurance if it falls under the blows of sanction penalties.
As a result of this, Venezuela has resorted to using smaller but more expensive vessels to ship its crude abroad, the Bloomberg sources said.
The Trump administration has been tightening the noose around Venezuela. The latest round of sanctions was signed in August and they spread to anyone doing business with the Maduro government. Following the signing of the order for the sanctions, the Shipowners' Club told its members to "exercise caution" in their dealings with Venezuela.
That's just the latest of Venezuela's many woes caused--or in some cases aggravated--by the U.S. sanctions. Earlier this year the country suffered several blackouts that crippled the already struggling economy. The blackouts led to the temporary shutdown of crude oil upgraders and an oil port, affecting exports.
Then the expiry of a sanction waiver for the handful of U.S. companies still present in Venezuela's oil industry threatened future production. The waivers, granted to Chevron, Halliburton, Schlumberger, and Weatherford expire next month and there is no sign that Washington would be willing to grant further extensions. This means the number of active drilling rigs in Venezuela could drop by as much as 50 percent.
Finally, Venezuela is having trouble with its Chinese partners. Beijing has firmly stood by the Maduro government and Chinese companies have stepped in to help PDVSA repair its refineries and boost crude production. Yet earlier this month, one of these companies said it had halted work on a crude oil blending plant that would have increased the output of the Sinovensa JV by 65,000 bpd. The CNPC affiliate said it had yet to be paid for work already completed.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More