VENEZUELA

CITGO Board

A U.S. court will decide whether a board of directors appointed by President Maduro or one backed by Juan Guaido, controls the eighth-largest U.S. refiner, Citgo Petroleum Corp. Venezuela’s principal foreign asset is caught in a tug-of-war as the US government uses the firm as leverage to topple Maduro.

Maduro’s representatives filed a lawsuit in Delaware Chancery Court to reassert control over Citgo and other U.S. subsidiaries of PDVSA , the Venezuelan SOC. The lawsuit wants the court to recognize the five-person board chosen by Maduro as legally appointed, which would give the socialist leader control over nearly $30 billion in revenue from Citgo.

Guaido, head of the opposition-controlled legislature, assumed a rival interim presidency in January, denouncing Maduro as a usurper who won re-election in a fraudulent. vote. In February, the congress appointed an ad-hoc PDVSA board with rights to nominate new directors for U.S. units PDV Holding, Citgo Holding and Citgo Petroleum.

Maduro retains the support of the military and controls PDVSA and most state functions. As president, he has full authority under PDVSA’s bylaws to name its boards of directors.The Guaido-appointed board was invalidated by Venezuela’s Supreme Court which remains loyal to Maduro.

Luisa Palacios assumed the position of chair of Citgo under Guaido and is running the company, which is seeking a new chief executive officer. The previous government-appointed head, Asdrubal Chavez, lost control of Citgo and his Venezuelan board members were fired.

“PDVSA and its wholly owned subsidiaries are currently experiencing a crisis of leadership due to multiple parties asserting the right to name the board,” the complaint said.
The action against the Palacios-led group seeks “to determine the proper composition” of the boards for Citgo and the other two units. Citgo is “confident that U.S. courts will respect” Guaido’s recognition by Washington as the legitimate representative for Venezuela with authority to name directors. This complaint is a frivolous effort to use the courts to litigate the foreign policy judgments of the President of the United States.”

Washington imposed sanctions on Venezuela and PDVSA in January, aimed at curbing oil exports and adding pressure on Maduro to step aside. Since then, shipments have declined about 40%.

Jonathan Stempel

Sanctions debilitate oil output

President Maduro is standing firm, despite oil production falling to levels not seen since the oil lockout of 16 years ago
The oil sector continues its precipitous collapse, stricken by sanctions and mismanagement which have reduced crude production to its lowest level since 2003 when months of nationwide protests occurred at PDVSA.

Russian gas giant and LNG trains in Trinidad

Russian gas giant Rosneft PJSC has been granted two gas fields by Venezuela, which are only 62 miles from Trinidad and Tobago.

– Bloomberg

(Bloomberg) — Rosneft PJSC is extracting concessions from Venezuela to enter the offshore natural gas market on the cheap, a potential headache for the U.S. and Europe. An accord signed by Russia and Venezuela will give the Russian state-controlled oil titan
tax breaks to produce and export gas from Patao and Mejillones fields off Venezuela’s east coast. The document, which also includes a “fair market price” in the event of an expropriation, makes changes to a bilateral agreement in 2009, according to a filing by the Russian government. online by the legal information website, which publishes orders by the president and applied international treaties

The deal underscores how Russia is both bolstering and gaining from the Maduro regime when the U.S. is sanctioning Maduro and PRC ended aid. Venezuelan gas could eventually offer Russia new entry points into both Asia and Europe. U.S. officials, including National Security Adviser John Bolton, have repeatedly accused Russia, as well as Cuba, of condoning the regime.

“China is backing away in terms of its financial exposure,” the Center for Strategic and International Studies, said . “… the Russians, over the past few years, ..doubled down and see this as an opportunistic plan.”

Since 2014, Rosneft loaned about $6.5 billion to crisis-ridden Venezuela in exchange for oil which Petroleos de Venezuela SA repays by delivering barrels to Rosneft. It had an outstanding debt of about $1.8 billion in the first quarter, according to a company presentation.

As a result of changes signed by President Putin, Rosneft and its suppliers will be exempt from value added and import taxes to develop the two gas fields, adjacent to acreage where Exxon Mobil Corp. is developing oilfields in Guyana. .

Rosneft is also considering entering Deltana 5, a natural gas block, much closer to a disputed border . Maduro has vowed to block Exxon from exploring in the contested area.

Trinidad and Tobago

The fields, estimated to hold 6.4 Tcf of natural gas, twice the proven gas reserves in neighboring Colombia, are less than 100 km (62 mi) from Trinidad and Tobago, where declining domestic output has left export facilities with spare capacity that could be filled by output from Venezuela.

Rosneft would have two options to export the gas. It could build a liquefied natural gas plant in Venezuela, or it could pipe the gas to Trinidad where LNG trains have spare capacity.

The pragmatic Venezuelan government realizes that oil fields have to be negotiated on favorable terms to be competitive, according to Antero Alvarado of consultant Gas Energy Latin America but he expressed doubt on how Rosneft will monetize the gas.

Venezuela lacks LNG facilities and Russia lacks strong commercial ties with Trinidad, the obvious market to initially sell it. The deal suggests Russia may seek a presence in Trinidad.

“Deepened Russian involvement with regional energy producer Trinidad is a cause for concern. The Russians already dominate gas production in Asia and Europe and are developing massive further capacity in Siberia and the Arctic,” Caracas Capital Markets, said

Russia has a history of sustaining politically-aligned allies like Maduro to challenge U.S. influence in foreign affairs. Rosneft has collected PDVSA assets since 2011 when it bought the oil company’s stake in the Ruhr Oel GmbH refining company in Germany. It took stakes in three heavy oil project in the Orinoco basin, as well as two joint ventures in Lake Maracaibo fields..

Some Russian investors left Venezuela. Lukoil sold its stake in a heavy oil project to Rosneft in 2014. Earlier this year Gazprombank sold its remaining stake in the Petrozamora joint venture in western Venezuela to an undisclosed buyer. Close ties Rosneft built with Maduro give it an incentive to stay the course.

“Initially it was the Chinese who were making all the loans to the Venezuelans and then the Russians took over and have exposure to some of the big oil projects in Venezuela and there’s something there for the Russians to protect and look after,’’ said Ruaraidh Montgomery, of Houston-based Welligence Energy Analytics.

IMF- Energy talks stall

Despite the upward revisions of growth for Trinidad & Tobago, there are headwinds, principally the political and economic turmoil in Venezuela.

In addition to the pressure from hosting over 40,000 Venezuelan refugees, T&T is concerned about delays to economically significant joint energy projects.

The Dragon project, which planned to begin piping 150m scfd of gas from Venezuela’s offshore Dragon field to a Shell platform in T&T waters this year, has come to a standstill. The project was intended to offer a secure gas supply at a competitive price, ensuring stability in case of fluctuations in domestic production.

On April 16 the energy minister, Franklin Khan told Parliament that while an agreement for the Dragon project was signed in August last year, no further steps had been taken.

The uncertainty of the political situation in Venezuela is also impacting long-running talks on the joint development of an offshore gas field. The Loran-Manatee field holds approximately 10trn cu feet of gas and has multinational Chevron as its leaseholder; however, final production-sharing agreements have yet to be concluded.

MSC Introduces War Risk Surcharge

Illustration. Source: Pixabay under CC0 Creative Commons

Switzerland-based Mediterranean Shipping Company (MSC) has implemented a war risk premium surcharge on cargo coming from worldwide destinations into Venezuela.

The surcharge will be applied with immediate effect, according to the company.

By imposing this supplementary charge, the carrier can recover potential extra costs it is going to bear. These charges are often applied in regions where piracy incidents are prevalent and in case of events that may escalate toward war.

The move comes “amid the imposition of sanctions related to Venezuela and the ongoing political volatility in that country”.

Venezuela is in the midst of a political, social and economic crisis due to the illegitimate regime of the government and the president Nicolas Maduro.

In response to corrupt practices of the government and individuals, countries including the United States imposed sanctions on Venezuela, related to terrorism, anti-democratic activities and human rights violations .

US sanctions include those targeting the oil sector and SOC Petróleos de Venezuela (PDVSA).

“The United States will continue tightening sanctions on oil and its derivatives until freedom and democracy are restored in Venezuela. International companies that continue doing business with sanctioned PDVSA are on notice,” John Bolton, Advisor for US National Security Affairs, said .

The US government unveiled new restrictions for US travel to Cuba, including banning cruise ship stops in the island country. The restrictions will tighten economic pressure on the Cuban government which supports the Maduro regime in Venezuela.

World Maritime News Staff

Tachira border post reopens

Four months ago President Maduro closed the border with Colombia during a dispute over humanitarian aid deliveries. It is not clear whether crucial border bridges will be unblocked.

The La Tienditas bridge between the Venezuelan state of Tachira and the Colombian city of Cucuta (Getty Images/AFP/E. Estupinan)

Maduro announced the decision to open the border post with Colombia, where international aid refused by his government has been accumulating.

“In exercising our sovereignty I have ordered the opening of the border crossing to Colombia in the state of Tachira on Saturday. We are a peaceful people, who determinedly defend our independence and self-determination.”

In February Maduro ordered the total closure of land frontiers with Brazil and Colombia, as well as sea and air links with the Netherlands Antilles.

The reopening of the pedestrian bridge between Tachira and the Colombian city of Cucuta will allow thousands of Venezuelans to work, shop or go to school across the border.

Maduro closed borders as opposition leader and self-declared interim President Juan Guaido prepared to bring in US-backed humanitarian aid.

As Maduro and Guaido — who has been recognized as interim president by more than 50 countries – vie for power, the country suffers from shortages of food, medicine and other essentials.

Maduro did not say whether crucial border bridges, closed since August 2015 after two Venezuelan soldiers were wounded by suspected smugglers, would be unblocked.

The government in Caracas opened the border with Brazil and the sea route to the island of Aruba but the Aruba authorities said the border would remain closed.

Since November, over a million Venezuelans have left the country, according to the UN, bringing the total number of migrants and refugees abroad to 4 million, up from 695,000 in late 2015.

Moscow Ready to Send More Defence Experts If Necessary – Foreign Ministry

MOSCOW (Sputnik) – Russia is ready to increase the number of its military experts in Venezuela to maintain Russian-made military equipment if the enhanced presence of such experts is necessary, the Russian Foreign Ministry’s Director of the Latin American Department Alexander Schetinin said.

“We have contracts [with Venezuela] on maintaining deliveries. Any maintenance work requires a certain number of people. Sometimes more, sometimes less. If more people are needed, we will send as many as necessary”, the diplomat said when asked whether Moscow was ready to increase the number of military experts maintaining equipment in Venezuela.

© AFP 2019 / FEDERICO PARRA

Russian Ambassador Firmly Rejects Rumour Kremlin Advisers Abandoned Venezuela

The Wall Street Journal reported that Russia had withdrawn key defence experts of state corporation Rostec from Venezuela.  Following the report, US President Trump tweeted that Moscow allegedly informed the US about having “removed most of their people” from Venezuela.

Responding to Trump’s statement, Russian presidential spokesman Dmitry Peskov said Russia did not officially notify the United States about that, adding that Russian specialists continue to work there.

READ MORE: Rostec Says Media Overestimate Its Presence in Venezuela by ‘Dozens of Times’   (Link to Russian News Agency Sputnik)

Russia Lambasts US Over Threats of Sanctions on Moscow

US Venezuela special representative Elliott Abrams threatened Moscow with new sanctions over Russia’s military cooperation with Venezuela,

Source: Reuters

New US Restrictions Target Oil Blending

The U.S. is stepping up efforts to cripple Venezuela’s oil industry by targeting the petrochemicals the country’s state-owned oil company needs to keep its crude exports flowing.
The U.S.is targeting the petrochemicals the SOC needs to keep its crude exports flowing. escalating efforts to cripple the oil industry in the OPEC founder.

The U.S. Treasury’s Office of Foreign Assets Control said that sanctions on Venezuela’s petroleum industry will no longer exclude the export or re-export of diluents, a class of hydrocarbons blended with heavy, viscous types of crude oil to make them lighter and more marketable.

Most of Venezuela’s remaining production is low-quality crude that needs dilution with lighter grades or partial refining before it can be sold on the global market. The U.S. decision may complicate PDVSA plans to convert heavy-crude upgrading facilities, beset by operational problems, into simpler blending facilities that are easier to operate.

The ruling is also a sign that the Trump administration continues to push for regime change in Venezuela, even though his counterpart there has managed to withstand U.S. sanctions and international isolation. Recent talks in Oslo between Maduro’s regime and the Venezuelan opposition failed to produce a breakthrough.

The amendment from OFAC targets U.S. citizens, but it also cautions non-Americans against trading diluents with PDVSA. That “appears to threaten, if not impose, secondary sanctions on non-U.S. entities” that operate in Venezuela’s oil sector or materially assist PDVSA, Clearview Energy Partners LLC said.

“Secondary sanctions targeting third-party crude transactions with PDVSA could create contagion problems due to interactions between Russian and Chinese companies operating in Venezuela.” .

This year PDVSA imported almost 1 million barrels of Agbami crude from Nigeria to be a diluent by blending it with Orinoco sludge oil, making it acceptable to foreign refiners. Venezuela’s output fell to 768,000 barrels a day in April, according to OPEC.

Additional measures may be on the way. Waivers allowing Chevron Corp. and four U.S.-based oil services suppliers to continue operating in Venezuela are set to expire July 27. If the U.S. does not renew those waiver and implements other measures such as secondary sanctions against non-U.S. companies, it could reduce output by another 300,000 barrels a day , said energy consultancy IPD Latin America.

(Bloomberg)

Chevron seeks relief from sanctions

 Chevron Corp. is lobbying the U.S. for sanctions relief to continue doing business in Venezuela where President Trump is seeking regime change.

Chevron executives tell local staff that the company expects extension of waivers that expire on July 27 , allowing it to remain in Venezuela. Chevron is actively lobbying for an extension and wants a decision by mid-June so it can notify suppliers in advance.

As the U.S. refuses to recognize Maduro as the country’s president after a sham election last year, oil sanctions are its main tool for depriving the autocratic leader of cash and pressuring the military to turn on him. If Chevron leaves, Maduro could take full control of assets the company invested in for decades and hand them over to Russian and Chinese explorers.

Sanctions imposed in January barred U.S. companies from dealing with any arm of the Venezuelan government or entities controlled by Maduro but Chevron and some oilfield-service providers including Schlumberger Ltd. and Halliburton Co., were granted permission to continue operations until late July.

A State Department official said it does not share information on internal discussions related to sanctions.

(Bloomberg)

Plunging production

Venezuela’s crude output plunged to 740,000 bpd in March amid a blockade on exports to the U.S. and rolling blackouts in the main production regions. Large volumes of Venezuela’s output are pumped by Chevron.

If the waivers expire it could take another 300,000 to 400,000 bpd off the market, said  IPD Latin America, . “The Trump administration will have to reconcile that volume with the value of maintaining a strong U.S. foothold in the country.”

For Chevron, that foothold includes key fields throughout the country. In the Orinoco Belt, it is a minority partner with PDVSA at two projects that use industrial facilities to convert extra-heavy crude into a product that can be sold to refiners. In Lake Maracaibo, it has a joint venture with PDVSA at the Boscan field that Chevron discovered in 1946 and where production costs are lower than in the Orinoco.

Huff and puff

On the ground, Chevron is proceeding with needed investments at its main Venezuela projects amid the uncertainty. These include steam injection at Orinoco wells to free up heavy crude and improve yields.

Chevron and PDVSA are contracting firms and workers for maintenance and engineering projects in eastern Venezuela near the heavy Faja del Orinoco fields, a sign that the company is not preparing to pull out or halt operations in the near-term. Chevron is paying for the process, known as “huff and puff,” even though on paper Petroleos de Venezuela SA is the operating partner and majority shareholder in the ventures.

Chevron CEO Mike Wirth s signaled his intent to stay in Venezuela, home to the world’s largest oil reserves. The company has “very close coordination” with the U.S. government and will remain in full compliance with American law, Wirth said .
“We work closely with the U.S. government to understand how their policy objectives are being manifest through the sanctions they have issued.”

In 2018, Chevron had 42,000 bpd of oil production and 9 MMcfg output in Venezuela.

“The sanctions to date have had modest impacts on U.S. business interests,” said the Center for Strategic and International Studies. “This action would be more severe and so it will be interesting to see if the administration is willing to go to that length in trying to bring about a change in power.”