Page 6 - EurOil Week 21 2022

EurOil COMMENTARY EurOil

producing about 700,000 bpd and has to keep They might very well find, though, that US
some of these barrels back for its own use, and it Gulf Coast (USGC) refiners would be happy to
won’t be in any position to boost output substan- buy as much of their Venezuelan oil as possible,
tially unless PdVSA secures supplies of several provided that they were not penalised for doing
different types of goods and services. It needs so under the sanctions regime. After all, many
parts and equipment to repair its production and USGC refineries are set up to handle heavy
processing complexes, as well as its pipelines and crudes of the type produced by Venezuela, and
ports, and it also needs experts and technicians they have not been able to buy from their former
to help carry out these repairs, which have been main supplier for the last few years.
neglected for several years. The NOC also needs If Eni and Repsol (and eventually Chevron,
more gas condensate and other blendstocks so assuming that it is able to move past the negoti-
that it can combine its own extra-heavy crude ation stage) started moving Venezuelan oil into
oil output to make a lighter synthetic fuel that is the US market, they would not really displace
of more interest to customers. any US oil production. As previously mentioned,
On that note, it’s worth remembering that many USGC refineries are set up to process
PdVSA has historically not sold much oil in heavy sours rather than light sweets, and most
Europe. The company doesn’t have a huge cus- US barrels consist of light sweets. However, hav-
tomer base in the European market, mostly ing extra supplies coming into the USGC region
because its offerings are not much in demand might help support a shift in trade flows that
among refiners in Europe. (This is true for both would see additional volumes of US oil moving
its heavy/extra-heavy crudes and its lighter into Europe.
blended synthcrudes; many European refiners If so, it would probably be those extra barrels
would rather have light sweet crudes from the that helped the Continent overcome the disrup-
North Sea or West Africa or medium sours from tions arising from the Russian war on Ukraine
the Middle East or Russia than heavier, tar-like – not Venezuelan production per se, but a shift
grades from South America.) in global trade flows that involved both Venezue-
lan and US crude against a backdrop of contrib-
Shifting global trade flows uting factors. This shift is not likely to happen
As such, even if the US government were to quickly, though, as Venezuela’s oil sector is still
remove the threat of sanctions penalties from not in a position to make up for the loss of 20% of
Eni and Repsol, those two companies would not Russia exports to Europe – especially since that
necessarily find that European refiners would be number is likely to grow bigger as the EU moves
eager to buy Venezuelan crude to make up for ahead with plans to reduce reliance on Russian
their loss of access to Russian feedstock. energy.™

P6 www. NEWSBASE .com Week 21 27•May•2022