BREAKING NEWS
Venezuela ‘false berthings’ off Trinidad further obscure oil exports
The South American country appears to be making efforts to legally and successfully circumvent attempts by the US to stop it from exporting oil
Ships appear to be collecting oil cargo at Venezuela before stopping off at Trinidad and Tobago and then setting off again, raising suspicions that cargoes are being hidden
VENEZUELA’S NATIONAL OIL COMPANY IS USING CO-LOADS AND “FALSE BERTHINGS” INTO NEARBY TRINIDAD AND TOBAGO TO DISGUISE CARGO ORIGINS AS P&I CLUBS WARN THE HARDENING RHETORIC FROM THE HAWKS IN WASHINGTON COULD SWEEP NON-US OWNERS AND SHIPPERS INTO THE SANCTIONS NET.
Three PDVSA tankers that loaded oil cargoes in Venezuela since March 21 then diverted to areas close to Trinidad and Tobago for several hours, according to vessel-tracking data. After spending a short time in the waters of the Caribbean island, the tankers then departed for their final long-haul destinations.
The practice was identified as “false berthing” and similar to those used by Iran’s national oil company, Kpler, a Paris-based company that analyses cargo flows, said in a report. This was likely an attempt to get new bills of lading stating Trinidad and not Venezuela, according to Kpler, which added that the cargoes were fuel oil.
Tankers identified making this trajectory include the aframaxes Mindoro and Amore Mio and long range one tanker Serengeti, according to Lloyd’s List Intelligence. Mindoro is owned by George Economou’s TMS Tankers, while Serengeti is beneficially owned by another well-known Greece-based shipping company, Dynacom. The owner for Amore Mio could not be determined.
There is no suggestion that any of the shipments were in breach of US sanctions.
The obfuscation in Trinidadian waters is the second PDVSA tactic noted to complicate the destination and origin of petroleum and crude exports.
Two suezmax and two aframax tankers that loaded in Venezuela since the imposition of US sanctions on January 28 were also involved in ship-to-ship transfers off Gibraltar over March, data shows.
Rolling power blackouts that disrupted port loadings on top of US sanctions are shrinking crude exports from Venezuela to 17-year lows. Over March, just under 1m barrels per day was loaded on 33 tankers, according to Lloyd’s List Intelligence. That is the second-lowest volume seen since 2006.
Sanctions currently restrict the sales of crude and petroleum products from PDVSA to the US unless revenues are placed in escrow, cutting off the government of President Nicolás Maduro from its biggest export earner.
On April 12, the US Office of Foreign Assets Control expanded sanctions for a second time to include companies and vessels transporting crude to Cuba.
That prompted two P&I clubs to warn shipowners outside the US they could be affected.
“While initially thought to have limited direct impact on non-US persons engaged in trade with no US nexus, statements emerging from the US administration during March and April 2019 included warnings that non-US persons dealing with PDVSA might be exposed even in the absence of a US nexus,” Skuld said in an update published April 15.
The American Club also highlighted that sanctions were unclear.
“While there are no specific prohibitions aimed at non-US persons transacting business with PDVSA, there is the potential that non-US persons could nevertheless be subject to sanctions either for operating in the Venezuelan oil sector, or for providing material assistance to, or support for, PDVSA,” the club said in its April 12 circular to members.
“Ofac has obliquely indicated that a non-US person could continue to purchase petroleum and petroleum products from PDVSA, as long as there was no US nexus,” the circular added.
Two of the Trinidad cargoes are now sailing around the Cape of Good Hope and signalling Singapore, a typical destination for fuel oil cargoes. Serengeti is making a transatlantic crossing and signalling its next port as Gibraltar. The value of an 80,000-tonne fuel oil cargo would be around $33m in the Mediterranean, ICE Futures Europe data shows.
The Iranian-owned National Iranian Tanker Co, known as NITC, was the first to stymie vessel-tracking efforts while subject to US sanctions. NITC’s fleet of very large crude carriers and suezmax tankers have used ship-to-ship transfers and co-loading in areas off the United Arab Emirates and elsewhere to avoid detection. They have also turned off vessels’ satellite transponders.
Michelle Wiese Bockmann
Half-billion dollars of sanctioned oil offshore
The energy Leviathan lacks…..
Venezuela lacks space to store its sanction-stained crude that few dare to buy, forcing it to reduce output at a time when the world is thirsty for heavy, sulfurous oil.
Tankers holding 8.36 MMbbl of Venezuelan crude worth upwards of a half-billion dollars are floating off the country’s coast as the nation struggles to find buyers for its oil following new U.S. sanctions in January. An armada of 16 ships holds cargoes belonging to state oil company Petroleos de Venezuela, Chevron, Valero Energy and Rosneft Oil.
The backlog of ships and growing difficulty in keeping oil upgraders running underscore the impact U.S. sanctions are having on PDVSA. Shipments to America, once Venezuela’s largest customer, have shrunk . Without access to the U.S. financial system, on which many refiners and trading houses rely to finance purchases, PDVSA cannot find buyers outside India and China, to whom it owes oil in payment for past loans.
Oil ventures owned by PDVSA with Rosneft, Chevron, Total and Equinor, whose upgraders convert tar-like Venezuelan crude into oil that refineries can process, reduced rates because they ran out of space to store crude . With few buyers willing to take PDVSA’s oil, the alternative was to put some of that oil onto tankers to clear space and continue to operate at lower rates.
The PDVSA-Rosneft joint-venture Petromonagas upgrader stopped processing oil after running out of space to store production. PDVSA-Chevron’s Petropiar venture reduced output for the same reason. Petrocedeno, a PDVSA-Total-Equinor venture, is running out of oil to process as a ban on sales of heavy naphtha to PDVSA has made it difficult to ship the heavy oil through pipelines from inland fields to the upgrader. While Venezuela struggles to sell its oil, Canada’s self-imposed oil curtailment and OPEC supply cuts reduced availability of the type of oil Venezuela produces.
The tightness in heavy oil supply translated into higher prices for Colombia’s flagship oil Castilla, which competes with Venezuelan oil in the global market. Castilla for loading in March traded $4/bbl less than global benchmark Brent. That compares with a discount of $9.80 for cargoes that loaded in February.
(Bloomberg) –
Lifeline From Russia
SOC PDVSA moves its European office from Lisbon to Moscow as Russia rides to the rescue with naphtha, an obscure product, to thin its tar-like crude and keep exports flowing after U.S. sanctions,
Moscow-based SOC Rosneft Oil Co. PJSC, is sending the first cargoes of heavy naphtha to Venezuela since the U.S. imposed harsher sanctions on PDVSA at the end of January. The compound is used to dilute sludgy crude so it can move in pipelines to the coast. Without it, crude remains in the fields, unable to be upgraded into refinery-ready oil.
The shipments are critical to stave off further declines in oil production, which in turn will bolster attempts by embattled leader Maduro, a long-time Putin ally, to fend off opposition efforts to topple his autocratic regime. Oil output plunged by two-thirds after years of mismanagement and under-investment to 1 million barrels a day. It funds food-handout programs offering sustenance to a population thrust into deep poverty. Without the cash , hunger will grow along with pressure to oust him .
Over 50 countries, including the U.S., recognized National Assembly leader Juan Guaido as interim president Russia sided with the Maduro regime and pledges to help Venezuela avoid outside military intervention. Russia and PRC are major backers of Maduro, with ties dating back to 1999 when his predecessor Hugo Chavez came to power.
Two large Rosneft tankers, Serengeti and Abliani, will deliver a combined 1 million barrels of heavy naphtha from Europe to Venezuela in coming weeks, ending a month-long gap of supply. The volumes will bring relief but are far from solving the problem. Before the new sanctions were imposed in January, Venezuela was importing between 2 million and 3 million barrels of heavy naphtha every month.
Rosneft cargoes will replace imports from the U.S., which was the top supplier of the diluent. In 2018, all of Venezuela’s imports were from the U.S. Gulf Coast via trading houses including Reliance Industries Ltd., Citgo Petroleum Corp.’s LDC Supply Trading, Vitol Group and Trafigura Ltd.
Diluted crude from the Orinoco Belt will be fed into upgraders owned jointly by PDVSA , Rosneft, Chevron, Total SA and Equinor ASA. The upgraders, which can process 630,000 barrels each day, had been operating at reduced rates since even before the sanctions due to mechanical breakdowns and a shortage of chemicals. As storage space for crude runs out upgraders are squeezed from both sides, short of crude to process and losing the U.S. market, the main buyer for its synthetic oil. Inventories of these grades have been piling up in onshore tanks and on the water.
After Lukoil PJSC’s trading arm Litasco SA and Trafigura stopped new oil trading with Venezuela following sanctions, Rosneft — a partner of PDVSA in joint ventures — stepped up, buying crude oil cargoes and supplying fuels. The company loaned about $6.5 billion to Venezuela since 2014 in exchange for oil. PDVSA has an outstanding debt of $2.3 billion, according to a Rosneft presentation.
(Bloomberg)
Russian oil imports surge in US as Venezuela’s slow to a trickle
Only two ships carrying 766,000 barrels of crude oil from Venezuela arrived in the United States in the wake of debilitating oil sanctions lodged against PDVSA. Russian companies sent nine ships carrying 3 million barrels of crude oil and petroleum products.
Import data is evidence that Russia profits from the geopolitical battle, selling into the U.S. market while propping up the Caracas leadership that Washington aims to replace, taking advantage of the incompetence of Venezuela and expanding into the United States market, replacing Venezuela. In late January, the US administration slapped new sanctions on PDVSA, in its latest effort install new leadership under National Assembly chief Juan Guaidó. Venezuela’s oil sector accounted for as much as 70 percent of the government income. The last time Russia sent over three million barrels of oil to the United States was in 2011 before the U.S. imposed sanctions over Russia’s annexation of Crimea in 2014, preventing U.S. companies from financing or sending U.S. technology for the Russian industry but they did not block the purchase of oil from Russia.
While U.S. refiners can continue to buy Venezuelan oil for the next couple months, any proceeds paid for the oil must be directed to a special account controlled by the U.S. Treasury. Without a way to collect payment, Venezuelan oil executives have started to self-embargo oil exports to the United States.
“That is what the administration is hoping, to starve the regime of financial resources,” said Eric Farnsworth, a vice president of the Council of the Americas in Washington. “And the biggest fattest target there, essentially the only target, is oil exports and the U.S. has huge leverage there so that’s why they implemented that sanction.”
The administration has a limited window of time to take full advantage of the opportunity that sanctions present. The longer Maduro is able to remain in power amid sanctions, the more likely it is that Venezuela will find alternative buyers of its heavy crude oil.
Russia is seizing the opportunity in other ways, as well sending shipments of oil and oil products to Venezuela and Cuba. The Serengeti and the Albiani, carrying Russian oil products are on their way to Venezuela where they will unload diluents to thin the oil so that it can flow through over 60 miles of pipelines from the Orinoco oil belt to the coast, where it can be either upgraded or exported.
Venezuela will also purchase high-grade crude oil from Russia to send directly to Cuba which supplies security services and doctors, teachers, engineers, and other professionals to Venezuela in exchange for discounted oil.
“PDVSA hasn’t been able to ship those barrels to Cuba because, one, most of the gasoline, diesel is now being consumed domestically,” said Rapidan Energy. “A lot of the PDVSA refining capacity is offline. They’re consuming everything they can produce. They’re actually importing more than what they can produce.”
In the latest example of how Venezuela collaborates with Russia on energy and how dependent the regime is on Russia, Vice President Delcy Rodriguez announced that PDVSA will move its European headquarters to Moscow from Lisbon, according to Russian press accounts. The Russians are the only ones willing to help them.
Crude shipments dead in the water on sanctions
Venezuela’s exports to the U.S. hit zero after American sanctions on PDVSA crimped crucial crude exports.
American refiners took no crude from the OPEC founder for the first time in government data going back to 2010. Shipments have been on a steady downtrend since late January when the Trump Administration announced new sanctions on PDVSA. That extended a broader slide due to Venezuela’s struggles to maintain production.
US refiners looking to replace the lost Venezuelan heavy, high-sulfur oil are unlikely to find any solace from OPEC. The cartel and its allies indicated their commitment to keep to its latest production cuts in light of high global inventories.
Canada’s Alberta province is relaxing curtailments, but full pipelines remain a hurdle for shippers wanting to move additional barrels south. Nonetheless, more Canadian oil is heading for U.S. buyers, according to data from the Energy Information Administration.
(Bloomberg)
Shell, BP win from sanctions
Sanctions on Venezuela’s oil industry have made winners out of Royal Dutch Shell) and BP as U.S. refiners in need of substitutes are scooping up notable amounts of oil produced in the Gulf of Mexico.
Many giant Gulf Coast facilities need heavier oil to produce high-margin refined products like diesel and jet fuel. U.S. production has surged to a record 12M barrels a day, but less than 5% of that is heavy oil.
Black Power
A nationwide power failure in Venezuela could trigger “serious disruption” to the oil market, according to the IEA, but OPEC kingpin Saudi Arabia should have the means to offset any further production woes in Caracas.
Until recently, the IEA said Venezuela’s oil production had stabilized at around 1.2M barrels per day. That is also the size of the output cuts agreed by OPEC and some N-OPEC producers.
Oil production collapsed due to power blackouts throughout the country with SOC Petroleos de Venezuela and its joint venture partners struggling to operate wells and other facilities due to electrical problems. The government decided to ration electricity, in part to supply power to the Jose oil export terminal, the primary source of revenue.
Oil wells were halted and production stopped in some parts of the country as the industry depends on the national electricity grid. There were no details on the scope or duration of the stoppage but the cuts are severe. The impact will be reflected in official production reports for March and company president and Oil Minister should provide details. PDVSA said that gasoline supplies were guaranteed across the country.
Venezuela’s oil industry was already decimated in recent years by declining production, lack of investment and an exodus of trained and experienced managers and workers. Before the latest development, output had slumped to around 1.1 million barrels a day, down from 2.4 million five years ago. In addition, sanctions recently closed Venezuela off from the U.S. market both for crude exports and imports of refined goods needed to blend with its heavy grade oil. Venezuela was exempted from the last round of OPEC-mandated output cuts due to the steep decline in production.
“The deterioration has accelerated,” Fatih Birol, executive director of the International Energy Agency, said at the CERAWeek by IHS Markit conference in Houston. Even before the current power blackouts, the IEA was expecting Venezuelan output to decline a further 500,000 barrels a day over time. “I don’t see a reversal of the production trend in the current context.”
Free Fall
Venezuela oil production is at the lowest level since the 1940s
Output of lighter grades in the west of the country has been hit hardest while some areas of the Orinoco Belt have been able to keep pumping.
The Orinoco Belt, which represents over 50 percent of total production, is connected to high voltage power lines coming from the hydroelectric dam, El Guri where the bulk of Venezuela’s electricity is generated. PDVSA runs joint ventures with Equinor ASA, Chevron Corp, Total SA, Rosneft and Repsol SA, among others in the area. Chevron and Equinor referred requests for comment to majority joint venture partner PDVSA .
Oil stocks at upgraders, which are used to convert heavy tar-like crude into lighter blends for export, have reached their limits in the past weeks and downstream production was already being cut back at some oil wells to prevent backlog.
The government is silent on the power failures and impact on the oil industry. Beyond blaming the opposition and U.S. for alleged sabotage of the Guri dam and distribution lines, Maduro’s administration has only said that school and work would be suspended.
The opposition, led by National Assembly President Juan Guaido, says the nationwide blackout is the result of poor maintenance and investment in the power grid over the past few decades of socialist rule. There is no exact information on which of the 23 states may have regained power and weak cellphone signals have made communication extremely difficult throughout the country.
“There’s a vicious circle,” Birol said. “Since the oil isn’t exported, there’s not revenue, since there’s not revenue you cannot invest in infrastructure.”
Source: OPEC secondary sources
U.S. Withdraws Diplomatic Personnel
The State Dept. says the move was prompted by the deteriorating situation in Venezuela.
(Reuters) – The United States will withdraw all remaining diplomatic personnel from Venezuela this week, the U.S. State Department said , citing the deteriorating situation in the country after months of political unrest.
It followed Washington’s decision to withdraw all dependents and reduce embassy staff to a minimum in the OPEC founder hit by unrest over a contested presidential election.
“This decision reflects the deteriorating situation in Venezuela as well as the conclusion that the presence of U.S. diplomatic staff at the embassy has become a constraint on U.S. policy,” the State Department said in a statement.
It did not give more details or set a day for when personnel would be withdrawn from the embassy in Caracas.
Venezuela’s congress declared a “state of alarm” over a five-day power blackout that crippled oil exports and left millions of citizens without food and water.
Venezuela suspended school and business activities due to the power blackout, the third such cancellation since power went.
The outage has added to discontent in a country already suffering from hyperinflation and a political crisis after opposition leader Juan Guaido assumed the interim presidency in January after declaring President Nicolas Maduro’s 2018 re-election a fraud.
CNN – Power finally restored
The information minister said that a huge power outage that left most of the country dark for a week has been completely restored.
The Information Minister said that a huge power outage that left most of the country dark for a week has been completely restored. “President Nicolas Maduro has decided to resume work activities throughout the country…, School activities remain suspended for another 24 hours.” He urged people to unplug appliances and turn off lights. “Help us to help you.” The power failure left homes without running water and caused chaos in hospitals, disrupting places of work and schools. 19 of 23 states were affected and Caracas was blanketed by darkness.
Power has been restored in parts of Caracas, but not everywhere. Chaos paralyzed airports and hospitals, cutting phone and internet services and water supply. The widespread power outage left parts of the country vulnerable to vandalism and looting, and stores in Maracaibo had their fronts smashed and shelves left bare.
Hospitals experienced intermittent power outages throughout the day in Valencia, Merida, and Maracaibo. All reported hours-long outages and are either relying on generators or transferring patients to hospitals in neighboring towns.
Zulia is one of the poorest regions in Venezuela and nowhere was the havoc as intense as in the country’s second city, Maracaibo, convulsed by a wave of looting and violence in prolonged power outages. 500 businesses were sacked in the unrest, and people injured in clashes between looters, security guards, gangs and the security forces. Restoration of basic services has been slower in the country’s interior. In sweltering Maracaibo, during looting of shops and factories, merchants demanded foreign currency for purchases while electronic payment systems were down.
The struggle to live through Venezuela’s blackouts
80% of country and 70% of Caracas now has drinking water. People who depend on electric pumps had resorted to filling containers from natural springs, drainpipes and dirty streams.
UN spokesman Stephane Dujarric said, “We are very concerned about the serious humanitarian impact that the power outage is having in Venezuela, as well as about reported incidents of looting and violence throughout the country.”
Blame game
The Information Minister accused supporters of the opposition leader Juan Guaido, of trying to bring down the electrical grid by plugging in all their appliances. Military exercises have been “ordered this weekend to protect the electric grid.”
Maduro said the recovery from power outages will be “little by little” and blamed the United States for attacking the power structure, saying the “imperialist government of the United States ordered this attack.” He offered no proof for the claim. The US has attributed the outage to the Maduro regime’s “incompetence.“
Guaido told CNN that the accusations of a US cyberattack were absurd. Venezuela’s main power plant is full of aging, analog machinery not connected to any network,
“We are in the middle of a catastrophe that is not the result of a hurricane, that is not the result of a tsunami. It’s the product of the inefficiency, the incapability, the corruption of a regime that doesn’t care about the lives of Venezuelans.”
The private sector had lost at least $400 million from power outages.
Venezuela’s National Assembly approved a request from Guaido to respond to the widespread outages with a “national state of emergency.” The decree will allow the National Assembly to seek international cooperation or foreign intervention.
Guaido, who invoked the constitution in January to assume an interim presidency, saying Maduro’s re-election was illegitimate, called on supporters to stay committed to “Operation Freedom.”
“Very soon, when we have visited and organized every inch … we will go to Miraflores and reclaim what belongs to the Venezuelan people,” Guaido said, referring to the palace, in the industrial city of Valencia 176 km (109 miles) west of Caracas, where he toured shops.“They are threatening to go to Miraflores,” Diosdado Cabello, the party’s vice president who leads the all-powerful National Constituent Assembly, said . “We cannot allow that. They left from there before, and they will never again enter the palace of the revolutionary people.”
Black water poured out of faucets in the northern state of Carabobo
According to the Mayor of the San Diego , the water issue was down to “human error” and not related to the power outage.
“My understanding is that at 5 a.m. .. the pumps stopped pumping, and what was in the tubes stayed in the tubes. They are cleaning the pipes. At this moment, there is no water service.”
Amid the difficulty of the week-long power outage across Venezuela, the incident adds to the problems people already face getting access to clean drinking water in this state.
A REUTERS SPECIAL REPORT
How Russia sank billions of dollars into Venezuelan quicksand
Russian oil company Rosneft spent a fortune on joint ventures in Venezuela even though it suspected it was losing out on millions of dollars, documents show. It continued investing, because the Kremlin wanted to support its ally in South America.
MOSCOW – At the end of 2015, managers at Rosneft, the Russian state-controlled oil firm, sounded the alarm about the company’s investments in Venezuela. Rosneft’s local partner, Venezuelan state oil company PDVSA, owed it hundreds of millions of dollars, according to internal documents, and there seemed no prospect things would get better.
“It will be like this for eternity,” a Rosneft internal auditor wrote in an email to a colleague in November 2015, complaining there was no progress in getting PDVSA to explain a $700 million hole in the balance sheet of a joint venture.
The email was among scores of internal Rosneft communications – including presentations, copies of official letters, memos and spreadsheets – reviewed by Reuters. They cover the firm’s operations in Venezuela between 2012 and 2015.
It was a period when other international oil companies had either quit the country or were freezing new onshore investments, worried about the policies of the populist socialist administration. But Rosneft, majority owned by the Russian state, doubled down, increasing its stakes in joint ventures with PDVSA and lending more, the documents show. Rosneft was standing by its Venezuelan partner just as the Kremlin was supporting leader Hugo Chavez and his successor as president, Nicolas Maduro.
RELATED CONTENT
Billions spent, little to show: Rosneft’s investment in Venezuela
Rosneft
Rosneft has poured around $9 billion into Venezuelan projects since 2010 but has yet to break even, Reuters has calculated, based on Rosneft’s annual reports, its public disclosures and the internal documents.
The Rosneft documents also reveal:
• The Russians believed they were owed hundreds of millions of dollars from their joint ventures with PDVSA.
• Oil output at the joint ventures was far lower than projected.
• The joint ventures struggled to get hold of basic drilling equipment.
• The Russians believed PDVSA spent millions of dollars from one joint venture on “social projects” in a remote area where just a few hundred people lived.
• Managers brought the problems to the attention of Rosneft’s chief executive, Igor Sechin, who ordered measures to right the ship.
Since late 2015, the end of the period covered by the documents, some of Rosneft’s problems have eased because it has taken greater shareholder and operational control of its interests. But it remains deeply invested in a company and a country that are in crisis.
The reason Rosneft kept doubling down on its bet was political, according to people close to the firm and others with links to the Venezuela projects. Rosneft was expected to help prop up Moscow’s allies in Caracas.
“From the very beginning it was a purely political project. We all had to contribute,” said an executive at a Russian oil firm that partnered with Rosneft in Venezuela.
Rosneft Chief Executive Igor Sechin who oversees this strategic business relationship is one of President Putin’s closest lieutenants. The two men have known each other since the early 1990s when they worked in the mayor’s office of their native St Petersburg. When Putin went to Moscow to become a mid-ranking official in the presidential administration, Sechin went with him.
A bust of Hugo Chavez greets visitors to Rosneft’s offices in Caracas. Sechin often asks to see messages to Maduro before they are sent and adds the phrase: “Viva la Revolucion!” a former Rosneft employee said.
Russia views its relationship with Caracas as a way to project power into Washington’s backyard, according to Alexander Gabuev, a senior fellow at Carnegie Moscow Center, a think tank. Venezuela is a big buyer of Russian weapons. The billions of dollars that Rosneft has invested in Venezuela are an added incentive for Moscow to keep standing by its old ally.
The story of Rosneft’s troubled partnership comes at a time of deepening crisis inside Venezuela’s giant oil company. The country’s fortunes are closely tied to those of PDVSA, which accounts for 90 percent of the nation’s export revenues. The Rosneft documents provide fresh evidence of long-term mismanagement at PDVSA, helping explain an economic collapse that has left millions struggling to eat.
U.S. Secretary of State Mike Pompeo said on March 11 Rosneft continued to buy crude oil from Venezuela and to “throw a lifeline to the regime.” But Kremlin spokesman Dmitry Peskov said Rosneft was driven by the interests of its shareholders. He denied the Kremlin applied pressure on the firm to invest in Venezuela.
“First and foremost, Rosneft works as a commercial company in all corners of the world, and it works seeking commercial profit. Therefore this is what they do in Venezuela,” Peskov said in reply to questions from Reuters. “Naturally such major projects are planned for the long term. As for assessments of the profitability of the projects, that’s for the company itself, it’s not a question for us.”
Rosneft has looked to expand overseas through deals in Venezuela.
Missing parts and missed deadlines
In September 2012, at a drilling site in the Orinoco basin, Rosneft’s Sechin filled a jar with crude oil and lifted it into the air to mark the moment his firm joined the ranks of global oil majors. Rosneft was part of a Russian consortium that had acquired a 40 percent share in Venezuela’s Junin-6 oilfield. PDVSA held the other 60 percent.
Rosneft already pumped oil from its home fields in Siberia; now it had an overseas presence too, tapping into some of the world’s biggest crude oil reserves on the banks of the Orinoco River.
“Today is indeed an historic day,” Sechin told Russian state television at the ceremony to mark the start of production. “Russian companies have now proved their right to be among the leaders of the global oil sector.”
Yet soon after Sechin spoke, Rosneft’s foray into the Orinoco basin was running into problems, the documents reviewed by Reuters show.
In November 2012, without asking its Russian partners, PDVSA shut down one of the four drilling rigs at Junin-6 and removed it, a report by the Russian consortium found that year. Local people staged protests that further blocked work. By the end of 2012, just six wells had been drilled, far short of the project’s target of 47.
“As of 15.08.2015, PDVSA is in technical default.”
Eric Liron, vice-president of Rosneft writing to Rosneft CEO Igor Sechin in October 2015
Spare parts for drilling at Junin-6 were procured from PDVSA unit Bariven; but getting equipment from Bariven took 10 to 18 months, according to the documents. Drilling rigs were not operating 37 percent of the time. It took on average 49 days to drill a single well, instead of the anticipated 22 days. PDVSA did not respond to questions about the delays.
Junin-6 production forecasts were cut. Rosneft had said in September 2012 that the field would deliver 20,000 barrels per day by the end of the year. In fact, over the whole of 2012 it yielded only 21,400 barrels.
Three years on, there was little sign of improvement. A Rosneft report covering the first three quarters of 2015 cited well construction “of an unsatisfactory quality” and “non-optimal trajectories” of wells.
By the end of 2015, the forecast for peak oil output from Junin-6 had been slashed from 450,000 barrels per day to 250,000 barrels per day. Rosneft’s flagship project had lost its lustre.
REUTERS/Sergei Karpukhin
OIL POWER
Venezuela has the world’s largest proven oil reserves. Problems remain across the Orinoco Basin. In fields east of Junin, only a handful of the dozens of drilling rigs are working at any one time. Workers lack basic equipment such as boots, gloves and helmets.
The situation in PDVSA offices is no better. Paper is in short supply. In a vain effort to stem a worker exodus, some HR departments display “No resignation” signs.
Nor is life in Venezuela easy for Rosneft staff. There is often no mains water in the high-end Caracas district where they live. A couple of times a week, a water tanker fills containers in each apartment.
Two of Rosneft’s Russian partners in Junin-6 left. The smaller Surgutneftegaz quit the project in November 2012. In December 2014, Russia’s second biggest oil firm, Lukoil, announced it was leaving. “Looking back, a lot of people at Lukoil breathed a sigh of relief that they didn’t have to pile billions into Venezuela,” said an executive in the Junin-6 consortium.
Rosneft bought out the Surgutneftegaz and Lukoil stakes for upward of $300 million, analysts estimated, deepening its exposure to Venezuela. It also acquired a stake belonging to TNK-BP when it purchased the Russian-British firm in a $55 billion deal in 2013. That left Gazpromneft, the oil unit of state-owned gas firm Gazprom, as Rosneft’s sole remaining Russian partner in Junin-6.
Rosneft had four smaller oil projects with PDVSA. All experienced problems during this period, the Rosneft internal reports show. Two projects, Carabobo and Petromonagas, are in the Orinoco basin; Boqueron is in the east near the Atlantic coast; Petroperija is on the Caribbean coast.
Rosneft internal reports from 2015 concluded that crude flow rates envisaged in the contract for the Carabobo fields were “not achievable.” At Petromonagas, poor quality work caused drilling delays. At Petroperija, production was falling and the joint venture did not have the cash to buy essential pumping equipment. At the Boqueron field, a broken compressor, a device to raise gas pressure, could not be fixed because the joint venture’s bank account was empty.
Money troubles
If getting oil out of its projects was a struggle for Rosneft, so was extracting revenue, the documents show.
The Russian consortium’s report into operations at Junin-6 in 2012 found that PDVSA had taken $12 million from the Junin-6 budget, without Rosneft’s agreement, for social spending. Only 350 people lived in the area of the concession – 447 square kilometers of hilly scrubland on the northern bank of the Orinoco River.
In the second half of 2014, Rosneft ordered an audit of the Junin-6 project to check for “distortion of financial accounting” and “unjustified expenditures.”
SOCIAL UNREST
Despite its oil resources, Venezuela faces an economic crisis that is spurring mass protests against the government of President Maduro. Supporters of the Venezuelan opposition leader Juan Guaido took part in a rally on March 4, 2019. REUTERS/Carlos Garcia Rawlins
Rosneft managers ordered the company’s own auditors to investigate money flows between PDVSA and the Petromonagas, Petroperija and Boqueron joint ventures, internal documents relating to the audit show. The audit concluded that PDVSA had understated earnings from Petromonagas oil sales by some $700 million. PDVSA challenged this figure, another document shows, and it was revised to $500 million.
In a document dated April 30, 2015, Sechin, Rosneft’s chief executive, approved the findings of the audit, and a plan to protect Rosneft’s investments with a series of measures to be implemented by the end of May that year.
The measures included installing metering stations to monitor how much oil was being pumped to customers, and therefore how much money the ventures should be earning. Rosneft wanted an independent assessor to track how the joint ventures spent money. And it wanted PDVSA to stop hiring its own subsidiaries without signing a contract. Reuters couldn’t determine whether the measures were put into action.
In October 2015, Rosneft First Vice President Eric Liron reported to Sechin that there was still disagreement with PDVSA on settling accounts with the joint ventures. Liron wrote in a memo to Sechin: “As of 15.08.2015, PDVSA is in technical default.”
Months of efforts to get the money – in which Rosneft’s Venezuela office and senior executives at headquarters engaged in negotiations with PDVSA officials – went nowhere.
The Rosneft internal auditor stated in the November 2015 email to his colleague that the problem was “unresolved because of the poor financial health of our partner” – a reference to PDVSA.
Discussing a proposal to push the internal deadline for fixing the problem to a later date, the auditor asked what would be the point. “Will it (PDVSA) return to health by then, or will it die and the question will no longer be relevant?”
The auditor left Rosneft in 2016.
Rosneft was supposed to receive its share of the revenue from oil sales in the form of dividends. As of the fourth quarter of 2015, Rosneft internal presentations showed that the company was owed dividends from three of its joint ventures. The total shortfall was $337 million. The presentations listed among the strategic aims of each of the three projects: “Receiving unpaid dividends” from PDVSA.
Since the period covered by the documents, Rosneft has acted to take greater control of its investments, by bringing in its own contractors. Rosneft says PDVSA has paid off much of its debt. In a financial report released on Feb. 5, 2019, Rosneft said the loans it extended to PDVSA, which had totalled about $6.5 billion, were now down to $2.3 billion.
But serious challenges remain
Rosneft’s own reports and assessments by energy analysts show the company’s projects in Venezuela are today still producing less oil than originally anticipated, with development plans either shelved or behind schedule.
Rosneft’s flagship joint venture in Venezuela, the Junin-6 field, is still stuck in the exploration and test production phase, Rosneft wrote in its 2017 annual report. An executive at Russian partner Gazpromneft went further, saying the project is now “commercially pointless.” The executive did not elaborate. Rosneft did not reply to Reuters questions about the commercial viability of the project.
LEADERSHIP BID
As Venezuela collapsed into crisis, opposition leader Juan Guaido, centre, declared himself himself president and was recognised by some countries. But the military continue to keep Nicolas Maduro’s government in power. REUTERS/Carlos Barria
Billions spent, little to show
Oil, loans, military – Russia’s exposure to Venezuela
Reuters estimates that after sinking more than $9 billion into Venezuela in loans, acquisitions and project spending since 2010, Rosneft, which is majority owned by the Russian state, has yet to show a profit.
At the end of 2018, Rosneft had spent approximately $1.5 billion more in Venezuela than it had earned in the form of oil allocated to it as dividends, according to Reuters’ calculations. This figure is reached by calculating the value of oil Rosneft received from its joint venture projects and subtracting from that outstanding loans Rosneft issued to PDVSA, official payments Rosneft made to Venezuela for access to oil fields, Rosneft capital expenditure on the ventures, and the cost of extracting Rosneft’s share of the oil. The cost figures are based on a benchmark for operational expenditure in Venezuela of $15 per barrel.
By Christian Lowe and Rinat Sagdiev
Rosneft did not respond to a request for comment.
LOSING HIS SHIRT?
Russia’s investments in Venezuela have proved less hardy.
The Reuters estimate of Rosneft’s financial shortfall in Venezuela could be conservative because it does not take into account tax Rosneft had to pay in Venezuela. This tax rate is not publicly disclosed, but Caracas normally takes at least 50 percent of the value of each barrel of oil.
The estimate also does not include instances where PDVSA, according to documents reviewed by Reuters, failed to give Rosneft the share of oil production at joint projects that the Russian company believed it was due. Nor does it include cases where Rosneft had to sink extra capital expenditure into fields and plug unexpected holes in the joint ventures’ balance sheets.
In April last year, energy consultancy Wood Mackenzie said its forecast for peak production at the Junin-6 field was now 120,000 barrels per day – half as much as Rosneft’s internal documents forecast back in 2015, and just over a quarter of the 450,000 barrels initially predicted.
The Boqueron field and Petroperija joint ventures were loss-making, Rosneft said in its financial report for 2018.
At the Patao, Mejillones and Rio Caribe offshore gas prospects, which Venezuela signed over to Rosneft in 2017, there was no development plan or infrastructure plan in place, Wood Mackenzie said last year.
The Petromonagas project – where Rosneft had planned to increase output – has also been falling short of hopes, internal PDVSA documents show. As of last July, it was pumping less oil per day than it had in 2015.
US Threatens New Sanctions as Hyperinflation Slows Down
The US government has increased pressure against Caracas mainly by targeting the oil industry.
REUTERS/RIA Novosti/Pool/Alexei Druzhinin
Debit card payments have become ubiquitous in Venezuela
https://venezuelanalysis.com/N3z2
Caracas, March 15, 2019 (venezuelanalysis.com) – The US is considering new sanctions that would stop Visa, Mastercard and other financial service companies from processing payments in Venezuela, according to a White House official quoted by Reuters.
“The purpose of these sanctions is to continue to deprive the illegitimate Maduro regime of access to funds,” the official said.
The measures would aim to “block state-owned financial institutions’ access to the international financial system” while exempting “everyday Venezuelans,” but no details were offered. It is also unclear at the time of writing whether the measure would affect debit cards as well as credit cards, with the former being the most common form of payment in Venezuela given the cash shortages caused by hyperinflation.
US sanctions have also seen two shipping companies sever ties with Venezuelan state oil company PDVSA. US-based McQuilling Partners and German Bernhard Schulte Shipmanagement (BSM), which managed 4 and 15 tankers for PDVSA, respectively, have recently announced they are no longer providing oil-shipping services to the Venezuelan firm, making it harder for Caracas to place its crude in global markets.
The US Treasury Department imposed a de facto oil embargo against Venezuela in late January, forbidding US companies from dealing with PDVSA and freezing Venezuelan assets in the US, chief among them US-based PDVSA subsidiary CITGO. On Thursday, the Treasury’s Office of Foreign Assets Control (OFAC), extended a license for CITGO to maintain its operations for a further 18 months, although the company is barred from sending any profits back to Venezuela.
Self-proclaimed “Interim President” Juan Guaido has attempted to nominate new executive boards for CITGO and PDVSA, with legal battles expected in US and international courts after the Venezuelan government vowed to protect its assets.
Venezuelan oil production has fallen steeply over the past couple years as a result of underinvestment, lack of maintenance, and US-led financial sanctions. OPEC sources put the February output at 1 million barrels per day (bpd), down from 1.67 million bpd in February 2018.
US officials have explicitly targeted the oil industry, responsible for over 90 percent of the country’s foreign currency income. Secondary sanctions against non-US companies dealing with Venezuelan oil have also been floated, and Secretary of State Mike Pompeo disclosed that he had talks with India’s Foreign Minister,Vijay Gokhale, to get Indian companies to stop buying Venezuelan oil. Caracas has scrambled to find new oil buyers following the US embargo, with India the main cash buyer.
The threat of further sanctions comes as the Venezuelan economy shows tentative signs of escaping the hyperinflationary spiral that has gripped the Caribbean country since early last year. According to the opposition-controlled National Assembly’s financial commission, inflation was 53.7 percent in February, down from 191,6 percent to in January. Hyperinflation is defined as a monthly inflation above 50 percent, and Venezuela has been mired in hyperinflation since November 2017.
The Venezuelan government unveiled a comprehensive series of economic measures in August, including a monetary reconversion, a devaluation of the currency exchange rate, and pegging the currency to the Petro cryptocurrency. However, the measures failed to deter hyperinflation, forcing the government to raise salaries by devaluing the Bolivar-Petro exchange rate.
The Venezuelan Central Bank changed course in December, aggressively devaluing the Sovereign Bolivar (BsS) with respect to the dollar in the official DICOM foreign currency auctions until it overtook the black market exchange rate in late January, at around 3,300 BsS per dollar. The black market rate has hovered around this value ever since.
Economists have credited this policy, along with measures meant to restrict the amount of Bolivars in circulation, for the stabilization or even decrease in some prices, but have warnedthat this comes at the expense of a contracted demand.
(Archive)
Market ‘cushion’ to take sting out of Venezuela hit
Monthly report from IEA highlights uncertainty over South American producer but points to spare capacity recently freed up by Opec cuts
In the well-lit dining room, dollar bills are flying. Waiters whisk expensive cuts of meat and bottles of whisky between tables; a couple dances to a band .
This steakhouse in the affluent Altamira neighbourhood is busier than ever and the front desk juggle payments with wads of cash.
A nightclub owner in his sixties who sips a vodka and orange at the bar, has come here with friends as “there is nowhere else in Caracas you can do this right now”.
Outside, the streets are deserted as night falls, a crippling nationwide blackout imposing a de facto curfew after another long day of searches for food, water, and fuel.
All but a tiny sliver of Venezuela is in chaos: schools and businesses are closed, water and petrol pumps have failed, communications, cashpoints and card-readers are down and transport has ground to a halt. Food is running out, and patients are dying in hospitals.
The only refuges are a few upscale hotels and restaurants like El Alazan, with their own generators – though these too are beginning to fail.
For now, they are the preserve of the well-heeled few: a meal at El Alazan costs several times the minimum monthly wage of 18,000 bolivars ($5), the Caracas hotels now at full occupancy still more. Many of these businesses, as well as the handful of open shops, are only accepting US banknotes – unobtainable for most Venezuelans.
A privileged class of businessmen has access to dollars and friends in high places
Dollars are keenly sought amid hyperinflation of the local currency: AFP
Despite years of economic collapse, it is still possible for the rich to live well . But it is not like this for most people. The city’s nightlife has hollowed out, those who can afford such luxuries are either with the government or involved in the drug trade . People who work, their salaries don’t stretch to anything.
Now, the blackout is pushing Venezuela over the precipice, with most fighting to simply survive. There will be war.
Five days since the lights went out in the oil-rich South American nation, some pockets have seen it return for brief periods, most of the country remains in darkness and despair is setting in.
Looting has broken out while protests are only repressed by fierce security forces and armed groups known as colectivos.
A 33-year-old driver in the impoverished Caracas barrio of Catia, spoke of fear and desperation as food and water ran out. Unrest was simmering, he said. “It was a very Chavista area but not now. People have had enough.”
$8.7B for unlawful expropriation of ConocoPhillips’ oil fields.
An international arbitration tribunal ordered Venezuela to pay the oil company $8.7 billion for unlawful expropriation of U.S. oil company ConocoPhillips ConocoPhillips’ oil and gas assets in Venezuela 2007.
The U.S. oil company said the International Centre for Settlement of Investment Disputes (ICSID) has unanimously ordered the government of Venezuela to pay the company the amount of $8.7 billion in compensation for the government’s unlawful expropriation of ConocoPhillips’ investments in Venezuela in 2007, plus interest.
The ICSID tribunal ruled in 2013 that the expropriation of ConocoPhillips’ substantial investments in the Hamaca and Petrozuata heavy crude oil projects and the offshore Corocoro development project violated international law.
The current ruling addresses compensation, and the timing and manner of collection remain to be determined.
“We welcome the ICSID tribunal’s decision, which upholds the principle that governments cannot unlawfully expropriate private investments without paying compensation,” said Kelly B. Rose, senior vice president, Legal, General Counsel and Corporate Secretary of ConocoPhillips.
In April 2018, in a separate and independent legal action, an international arbitration tribunal constituted under the rules of the International Chamber of Commerce (ICC) awarded ConocoPhillips approximately $2 billion from Petróleos de Venezuela, S.A. (PDVSA), Venezuela’s state-owned oil company, and two of its subsidiaries.
The ICC tribunal’s ruling arose out of PDVSA’s failure to uphold its contractual commitments in response to Venezuela’s expropriation of ConocoPhillips’ investments in the Hamaca and Petrozuata projects.
In August 2018, ConocoPhillips announced that it entered into a settlement agreement with PDVSA to recover the full amount owed under that award.
ConocoPhillips also has a pending contractual ICC arbitration against PDVSA related to the Corocoro project.
In the early 1990s, Venezuela created a new fiscal framework to induce foreign investment in its heavy oil projects in the Orinoco Belt and elsewhere.
“Relying on these terms, ConocoPhillips helped Venezuela develop the Petrozuata, Hamaca and Corocoro projects by providing industry-leading technology and substantial long-term investments to the government of Venezuela. However, in the summer of 2007, the Venezuelan government expropriated ConocoPhillips’ investments in their entirety without compensation,” ConocoPhillips said.
This is another blow to the country engulfed in a diplomatic and economic crisis following recent protests and by the fact that several countries have recognized a parallel administration led by Juan Guaido, following presidential elections where Nicolas Maduro was re-elected as president, the elections, which, as the EU put it, were neither free, nor fair.
Credit rating agency Fitch said that given the scope of the economic challenges and the large sovereign default, any political transition would take time to deliver on debt restructuring and materially improving the economic situation.
In the short term new U.S. sanctions imposed on state-owned oil company PDVSA will deepen the country’s economic crisis.
Oil production will likely fall further and more quickly affecting economic output, exports, and government revenues. The domestic disruption caused by protests and political uncertainty will further deepen the severe economic distortions that have been building for years and accentuate the humanitarian crisis.
External and internal political pressures on the Maduro administration are growing significantly. Most Latin American and European countries, the U.S., Canada and Australia have recognized Juan Guaido as interim president. A number of other countries have declared neutrality on the issue of the legitimate Venezuelan government, while China, Russia, Turkey and several others continue to recognize Maduro as president.
If Maduro is able to retain power, the prospects of reforms to stabilize the economy and end hyperinflation are likely to be diminished, at least in the near term. As noted, U.S. sanctions will have an immediate impact on the oil sector, likely leading to further falls in oil production that will be difficult to reverse.
Venezuela currently exports approximately 500,000 barrels a day to the U.S. These oil exports provide critical cash flow to PDVSA and the government. Over time, these exports can be diverted to other destinations, but this would entail a significant discount and higher costs for the company, squeezing margins. Furthermore, sanctions essentially preclude a debt restructuring by prohibiting U.S. entities to participate in new debt issuance by PDVSA or the government.
Oil output dropping until regime changes
U.S. Energy Secretary Rick Perry said the decline of oil output from Venezuela will continue until there’s a change of leadership.
The International Energy Agency expects Venezuelan output to fall to 800,000 bpd this year. Power outages in the nation have slowed production that has already been dropping in the aftermath of U.S. sanctions on Petroleos de Venezuela SA, the state-owned oil company.
“I think that until there is a change of leadership there, that being able to get their oil and gas production back in a positive direction is going to be threatened,” Perry said at the CERAWeek by IHS Markit conference in Houston.
The U.S. and dozens of other nations support opposition leader Juan Guaido, who has challenged President Nicolas Maduro’s government by declaring himself interim president, while Maduro refuses to step down.
“The United States stands ready to assist the people of Venezuela to get that country back in a positive direction from the standpoint of their economy, and that is based upon their oil and gas industry,” Perry said. “Hopefully, that will occur soon and the future of Venezuela can be positive again. But that will not happen until, from my perspective and I think in the administration’s perspective, until there is a change in leadership and Maduro’s gone.”
(Bloomberg)
Oil sector needs outside help
Oil output goes AWOL in Venezuela as soldiers run PDVSA
Venezuela’s opposition leader is rolling out the welcome mat to foreign investors who want a piece of the world’s largest oil reserves.
In a major break from the policies of President Maduro and his late predecessor Hugo Chavez, Venezuelan opposition chief Juan Guaido wants to allow foreign crude explorers to drill without partnering with the national oil company, a top adviser said at IHS Markit’s CERAWeek conference.
Under Chavez, seizures of foreign assets chased companies such as Exxon Mobil Corp. and ConocoPhillips out of the country and saddled the government with billions of dollars in reparation obligations. As the nation spiraled into economic, social and political chaos, Venezuela’s oil fields and infrastructure were neglected and starved of cash, leading to ruinous decline.
Venezuelan Ambassador Carlos Vecchio’s anti-Maduro remarks were interrupted by applause half a dozen times. At certain moments, Vecchio and Luisa Palacios, chairwoman of state-controlled Citgo Petroleum Corp., appeared close to tears. The large banquet hall was standing-room only.
“We need to open up the oil industry to private investment without the participation of the national oil company,” Ricardo Hausmann told the conference. Petroleos de Venezuela SA is an “obstacle” to recovery in the oil sector, he added. Foreign operators like Chevron Corp. that continued working in the country despite Chavez’s seizures would be grandfathered into the new system and not punished for cooperating with the current regime, Hausmann said.
The Venezuelan diaspora — and its large contingent of skilled oil engineers and technicians — will be “quite important” to rebuilding the country, Vecchio said.
“There hasn’t been investment for a long period of time,” Schlumberger Ltd. Executive V.P. Ashok Belani said at the conference. Things in Venezuela are “badly broken.”
Even as Venezuelan oil production free-falls, thousands of wells have had to be shut off because there aren’t enough tanks for storage, Belani said in an interview. Turning those wells back on will be challenging and expensive because many will have to be redrilled, he said.
Recent nationwide blackouts aggravated the output decline and probably pushed Venezuela crude production to about 600,000 bpd. This for an industry that was pumping 2 million a recently as two years ago.
Resurrecting Venezuela’s oil industry also will be complicated by the rise of relatively cheap shale exploration in North America and Argentina, and huge crude bonanzas in places like Guyana and Brazil.
(Bloomberg)
Russian Planes
Sputnik news agency reported two Russian military planes, landed in Venezuela’s main airport, to fulfil technical military contracts. A journalist saw about 100 troops and 35 tonnes of equipment offloaded from the planes.
Three months ago the two nations held joint military exercises.
Russia is a staunch ally of Venezuela, lending the OPEC nation billions of dollars and backing its oil industry and military and opposed moves from the US to impose sanctions on the government of President Maduro.
See also –
Russia condemns bid to ‘usurp’ Maduro
Why Russia has so much to lose in Venezuela
Venezuela’s crisis in nine charts
US Secretary of State Mike Pompeo spoke with his Russian counterpart, Sergei Lavrov, urging Moscow to “cease its unconstructive behaviour” in Venezuela.
“The secretary told Lavrov that the United States and regional countries will not stand idly by as Russia exacerbates tensions in Venezuela” the State Department said.
The Russian air force Antonov-124 cargo plane and a smaller jet landed near Caracas. General Vasily Tonkoshkurov led the troops off one of the planes. A military plane with a Russian flag was on the tarmac at an airport where Russian troops gathered.
Venezuelan government bars Guaido from public office
The Venezuelan government barred opposition leader Juan Guaido from holding public office for 15 years, though the National Assembly leader responded that he would continue his campaign to oust President Nicolas Maduro.
State comptroller Elvis Amoroso, a close ally of Maduro, cited alleged irregularities in the financial records of Guaido and reflected a tightening of government pressure on an opposition movement backed by the United States, Canada and other countries.
Guaido, elected to the assembly in 2015, made 90 international trips without accounting for the origin of the estimated US$94,000 in expenses, Amoroso said. He accused the opposition leader of harming Venezuela through his interactions with foreign governments which support Guaido’s claim that he is interim president of the country.
Guaido dismissed the comptroller’s announcement as irrelevant because, in his view, Maduro’s government is illegitimate. “The only body that can appoint a comptroller is the legitimate parliament,” he said.
Guaido has been recognized as head of state by most Western countries after invoking the constitution to assume the interim presidency, arguing Maduro’s 2018 re-election was illegitimate and that he became a usurper when his second term began in January.
Maduro dismisses Guaido’s claim to the presidency as a U.S.-backed effort to seize power in Venezuela, which is struggling under hyperinflation and crippling blackouts that citizens without power.
In Washington, U.S. State Department spokesperson Robert Palladino described the ban on Guaido as “ridiculous.“
Meeting in Ecuador, delegations from a group of European and Latin American countries also criticized the Venezuelan government’s move.
“Such a political decision without regard to due process is yet another demonstration of the arbitrary nature of judicial procedures in the country,” said the International Contact Group on Venezuela. The group says it seeks the peaceful restoration of democracy to the country.
Canada condemns move
Chrystia Freeland, Canada’s foreign minister, condemned the Maduro government’s actions. “Such efforts to sideline the widely and internationally recognized interim president of Venezuela further demonstrate Maduro’s contempt for democracy and the constitutional rights of Venezuelans. Canada will keep working with the Lima Group and our international partners as we continue to call for an urgent and peaceful resolution to the crisis in Venezuela.”
The power struggle between Maduro and Guaido has intensified the sense of crisis in Venezuela, which suffered its worst blackouts earlier and then another round of power outages paralyzed commerce.
Electricity had been restored in most of the country, though some areas remained without power and the system is vulnerable to further disruptions.
Much of Venezuela remains without electricity as a new power outage spread across the country.
Power returns for some
Schools and public offices were still closed, but there was more traffic in Caracas and many people were able to make electronic payments for the first time in days.
“It’s a moment of happiness in the middle of this tragedy, to see that my card worked,” a Caracas resident said after buying medicine in a pharmacy.
Both the opposition and the government plan demonstrations as they try to project resolve in a debilitating standoff in what was once one of Latin America’s wealthiest countries. Over three million Venezuelans left the country in recent years, escaping dire economic conditions that left many without adequate food or medicine.
Maduro, backed by Russia, says he is the target of a U.S.-led coup plot and has accused Washington and Guaido of sabotaging Venezuela’s power grid. He blamed a “cyberattack” by the United States for the first outage. He said this week’s blackout was caused by a gunman linked to the “perverse, diabolical right-wing” firing on a hydroelectric complex.
Both the U.S. and the Venezuelan opposition, as well as many electricity experts, believe neglect and mismanagement are the cause of the country’s electricity woes.
“They have spent years stealing money and not doing maintenance,” said Yolimar Arellano, in Caracas, who said she had electricity at home but no water.
Since the second outage hit , three people died in public hospitals due to a lack of electricity, according to J a doctor and member of the Doctors for Health nongovernmental organization.
Guaido has called for fresh protests against Maduro.