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Venezuela has been forced to start refining imported crude oil as its local production continues to fall. According to a monthly refining plan for June seen by Reuters, the state oil company, PDVSA, may refine 57,000 bpd of foreign oil at its biggest refinery, with the fuel produced to be supplied to Russian, Chinese, and other companies that PDVSA is in fuel supply contracts with.
At the same time, the company will reduce the purchases of fuels for its domestic market, according to the plan.
This is just the latest chapter in a long drama that last month saw PDVSA lose access to stockpiles of crude at Curacao as well as export terminals on two other Caribbean islands following Conoco’s enforcement of a court order for the seizure of assets of the Venezuelan company after Conoco was awarded US$2 billion in compensation for the nationalization of its Venezuelan operations.
As a result of the seizure, PDVSA is now grappling with a port capacity shortage on top of everything else, with Reuters reporting earlier this month that dozens of tankers are sitting in Venezuelan waters waiting to load, with some loadings delayed by almost a month.
The latest OPEC production figures revealed that Venezuela pumped 1.53 million bpd of crude in May, although, Reuters says, other sources put the figure lower, at 1.39 million bpd. This is how much the country, which is home to the world’s most abundant oil reserves, produced in the 1950s.
As a result of this decline in production, the availability of lighter grades to be used in heavier oil processing has diminished, leaving PDVSA no choice but to refine foreign oil. If PDVSA chooses not to do so, its problems with fulfilling fuel supply contracts will only worsen. If it chooses to refine foreign oil, it will come from Russia, Iran, or Angola.
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.