Page 8 - MEOG Week 39

MEOG PIPELINES & TRANSPORT MEOG

Venezuela and Iran take the next step

IRAN VENEZUELA’S oil industry has deteriorated main grade of crude exported from Venezuela.
significantly since January 2019, when the US The oil will probably be exported to Asia,
government imposed sanctions on PdVSA, which has become the main destination for
the national oil company (NOC). The signs of Venezuelan production, the news agency said.
decline have been obvious – falling production It did not name any possible buyers, but it did
levels, reduced refinery throughput and wide- note that most crude traders would be reluctant
spread fuel shortages. to buy Venezuelan product because of the risk of
Nevertheless, Venezuela’s government has being penalised under the US sanctions regime.
remained defiant, declaring its unwillingness to
give in to the US campaign to topple the socialist Stepping up enforcement?
government of President Nicolas Maduro. It has As of press time, the US government had not
also turned to Iran, which is also under US sanc- reacted publicly to news of the Iranian-aided
tions, for help. That help has taken various forms, shipment of Venezuelan crude. Washington may
including but not limited to shipments of Iranian take a different stance if Caracas tries this tactic
fuel to Venezuela by tanker and deliveries of Ira- again, though. More specifically, it will probably
nian refinery parts and equipment to Venezuela step up enforcement of the sanctions regime if
by plane. Within the last week, though, the par- it sees that Venezuela’s government is trying to
ties have expanded the range of joint activities to open up a new export route for its oil.
include Iranian-assisted exports of Venezuelan If so, some of the US actions will probably
crude oil. If they continue to do so, the US gov- target the shipping sector. There is precedent for
ernment is likely to react. this, as Washington has already applied sanc-
tions to Russian companies accused of acting as
Three fleets middlemen for Venezuelan exports (and has also
Iran has sent three tanker fleets to Venezuela signalled its willingness to penalise marine oper-
so far this year, according to press reports. The ators that do business with Caracas).
first fleet consisted of five vessels, all filled with But there may also be more seizures. That
Iranian gasoline. These ships arrived at a Ven- is, the US may opt to confiscate the cargo of the
ezuelan port in late May and early June and next fleet that attempts to bring refined fuels or
succeeded in discharging their cargo. They then similar materials from Iran to Venezuela – and it
departed the South American country and went may do so after putting more pressure on ship-
on to their next assignment. ping companies and marine facilities to help
The second fleet consisted of four ships. thwart efforts by Tehran and Caracas to con-
Again, all were loaded with Iranian gasoline. ceal such shipments through the disabling of
These vessels never arrived in Venezuela; transponders.
instead, they were confiscated by US officials at
sea in mid-August and redirected to a US port. Ongoing struggle
Information posted on shipping traffic websites In the meantime, fuel supply issues will continue
indicates that all four have unloaded their car- to loom large in Venezuela. The country has
goes and moved on to their next assignments. bought some time with the latest Iranian ship-
The third fleet consisted of three ships. All of ments, but it is still struggling in the face of the
these were initially said to be loaded with Ira- challenges posed by the sanctions.
nian gasoline, but Bloomberg and other agencies That struggle, according to Bloomberg, has
reported earlier this week that the vessels were led to something like industrial cannibalism.
actually carrying gas condensate, a light hydro- That is, it has driven PdVSA to strip scrap metal
carbon that can easily be refined into gasoline. In and parts from production, processing and
any event, they did arrive in Venezuela last week refining facilities that have been taken offline.
and delivered their cargoes to PdVSA for domes- The NOC reportedly hopes to use these mate-
tic consumption. rials to pay in kind for repair work at pumping
stations and compressor units that serve produc-
Third time’s the charm tion facilities in Monagas. This state, located in
The ships of the first and second fleets appear to eastern Venezuela, is home to deposits of light
have had no involvement in two-way trade. That crude oil that can be refined more easily than the
is, they may have been loaded with Iranian gaso- extra-heavy grades from the Orinoco belt.
line for delivery to Venezuela, but they were not As of press time, Venezuelan authorities had
loaded back up again after discharging their car- not said whether any potential partners had
goes in the South American state or in a US port. shown interest in the scrap metal and parts.
At least one of the third fleet’s vessels, This is not the first time Caracas has tried to
by contrast, has filled up for the return trip. pay in kind for refinery and production equip-
Bloomberg reported on September 23 that the ment repairs. Venezuelan officials recently tried
Iranian-flagged tanker, known as the Horse (and – and failed – to convince suppliers to accept
sometimes as the Honey), had been loaded up crude oil and fuel as compensation for $800mn
with Merey-16, an extra-heavy blend that is the worth of maintenance work and fixes.™

P8 www. NEWSBASE .com Week 39 30•September•2020