PDVSA halts oil-for-debt shipments to Europe, wants commodity swaps

By Marianna Parraga

HOUSTON (Reuters) – Venezuela has suspended new crude shipments to Europe under an oil-for-debt deal and asked Italy’s Eni and Spain’s Repsol to supply it with fuel in exchange for future shipments, said three people familiar with the matter.

Venezuelan oil company PDVSA is no longer interested in the oil-for-debt deals the US State Department authorized in May, the sources said, allowing the state-owned company to resume shipments to Venezuela. Europe after a two-year suspension caused by US sanctions.

Washington allowed the shipments as long as proceeds from the cargo were used to pay off PDVSA’s accrued debt to joint ventures with Eni and Repsol.

“PDVSA wants to go back to oil swaps, and it’s not possible yet,” said a person involved in cargoes previously delivered to Europe. “There is no point in oil-for-debt deals.”

Venezuelan oil shipments, especially those sent to refineries in Spain, have helped Europe reduce its purchases of Russian oil since the invasion of Ukraine. But the terms of the deal have not provided the cash or fuel needed for PDVSA, whose own refineries are struggling to produce gasoline and diesel after years of underinvestment and lack of repairs.

PDVSA, Eni, Repsol and the US State Department did not immediately respond to requests for comment.

According to PDVSA shipping schedules, there are no loading windows assigned to Eni or Repsol for shipments bound for Europe in August, even though Diluted Crude Oil (DCO) inventories at the port of Jose reached nearly 5 million barrels as of August 8.

PDVSA wants to get fuel in exchange for its crude, while using part of the value of the shipments to offset billions of dollars in debt to joint venture partners including Chevron, Eni and Repsol, the sources say.

The reshuffling of the deal could help the Venezuelan company revive its extra heavy oil operations in the Orinoco Belt, which require imported diluents such as heavy naphtha, and reduce the country’s fuel deficit.

Since last year, PDVSA has relied primarily on Iranian diluents to process its extra-heavy crude into exportable grades.

Since June, Eni has received a total of 3.6 million barrels of diluted Venezuelan crude oil (DCO), according to PDVSA documents and tanker tracking data. Most of this volume was then delivered by Eni to Repsol, which has greater capacity to refine heavy sour crude grades from the South American country.

Repsol CEO Josu Jon Imaz said in late July that the return of shipments from Venezuela was “good news” for its refineries, as the quality of these crudes is a perfect match for its refining system.

Resuming oil shipments to Europe helped PDVSA boost sales in June and July, with overall exports reaching 545,000 barrels per day (bpd) over the 60-day period, documents and vessel monitoring show.

Operational problems subsequently offset the increase in exports. But PDVSA plans to restart a third heavy crude upgrading unit, in the Petromonagas joint venture, which would increase crude production and export capacity. Last month, it resumed operations at an oil blending station and two upgraders that had been hit by power and gas outages.

(Reporting by Marianna Parraga, additional reporting by Isla Binnie in Madrid, Francesca Landini in Milan and Matt Spetalnick in Washington; Editing by David Gregorio)

Mary I. Bruner