Page 7 - NorthAmOil Week 30

NorthAmOil COMMENTARY NorthAmOil
Bad timing
e US court’s decision comes at a bad time for Venezuela, which is struggling with its worst- ever recession. Caracas desperately needs the funds that Citgo is capable of providing – or was capable of providing before the US imposed sanctions on PdVSA in January.
e downstream operator owns three re n- eries in the US – a 418,000 barrel per day re n- ery in Lake Charles, Louisiana, a 157,000 bpd re nery in Corpus Christi, Texas and a 179,265 bpd re nery in Lemont, Illinois. Together, these plants process more than 750,000 bpd. Prior to the imposition of sanctions, PdVSA depended on them as an export destination for its crude and as a source of re ned products and diluent.
Now, though, these facilities are out of reach. Even worse, the July 29 court ruling creates a precedent for more of Venezuela’s debts to be repaid through the unwilling seizure of shares in Citgo.
“It has the potential to be a big blow to Ven- ezuela,” said Russ Dallen, a managing partner in Caracas Capital. “ e pool of creditors that can now attack and go a er PdVSA is greatly expanded,” he told Bloomberg.
e ruling may also be a source of concern for investors holding PdVSA’s 2020 bond. e company pledged half of its Citgo shares as col- lateral for that securities issue, on which it began making payments in May of this year.
Power struggle
e decision also complicates matters for Juan
Guaido, the head of Venezuela’s opposition-con- trolled National Assembly, who is in the midst of a struggle for power with President Nicolas Maduro.
Guaido invoked Venezuela’s constitution in January of this year to assume an interim presi- dency, arguing that Maduro’s re-election in 2018 was illegitimate. A number of countries, includ- ing the US, have recognised him as president. Maduro, however, claims that the opposition leader is a US puppet who is seeking to oust him in a coup.
Since assuming his interim presidency, Guaido has named ad-hoc boards of directors to Citgo and PdVSA.
Even so, Maduro has nominated his own supporters to the board, insisting on his right to do so as president. Moreover, his board has led suit in a Delaware court, seeking control over Citgo.
For his part, Guaido has asked Trump to pre- vent creditors from seizing Venezuela’s assets, and there is certainly a possibility that the latter may grant such an asset-protection order. e US government has been fairly sympathetic to Citgo, having granted it some exemptions to the sanctions against PdVSA.
Under these circumstances, PdVSA’s posi- tion looks increasingly shaky. Even though the parties have yet to conclude their court battle, the NOC’s hold over Citgo looks weaker in light of the July 29 ruling – and will probably become even more so if Maduro continues to cling to power.™
The US government has been fairly sympathetic to Citgo, having granted it some exemptions to the sanctions against PdVSA.
The decision complicates matters for Juan Guaido, who is in the midst of a struggle for power with President Nicolas Maduro.
Week 30 01•August•2019 w w w . N E W S B A S E . c o m
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