CARACAS: Venezuelan state oil company PDVSA will secure contracts to import crude by early next year, a senior executive said, phasing out spot-market purchases as part of a bold strategy to reduce costs and boost quality of its final blends.
PDVSA is negotiating with some 15 companies and one option under discussion is paying suppliers with the final blend, Jesus Luongo, vice president of refining, trade & supply told Reuters in an interview.
These supply contracts would also allow for flexible routing, with crude potentially sent to Venezuela’s oil fields, domestic refineries, or foreign ones depending on need.
“We’ve already received proposals which we’re analyzing, and we’re waiting to be ready with our projects to make it happen,” Luongo said in his Caracas office, adding work is underway to allow pipes and loading areas to route light oil to the vast extra-heavy crude Orinoco Belt.
While coy on the details of ongoing negotiations with companies including leading international producers, Luongo said one option is paying with the final blend, which will likely produce grades very similar to the current Merey 16.
“We would take light crude, blend it, and with that production we will be able to pay for that light crude,” he said in front of a painting that shows late leader Hugo Chavez, liberation hero Simon Bolivar and singer Ali Primera hovering above Venezuela’s huge Amuay refinery.
Venezuela, home to the world’s largest oil reserves, surprised the oil market last year by importing crude to avoid costly purchases of naphtha, a growing trend among Latin American oil producers.
Light crude imports will allow Venezuela to keep blending and selling oil until new upgraders, to complement the current four, are built in around four to five years, Luongo added.
The North American shale boom has sidelined African light crude producers just as Venezuela’s own light crude output in mature fields declines, creating what Luongo called a perfect opportunity for cooperation.
Still, the light crude supplied under the contracts does not have to be African, although their light sweet nature, large inventories and proximity to Venezuela render them attractive. The contracts would likely be for the “medium-term.”
In the meantime, PDVSA will keep buying on the spot market, Luongo said. Since July, PDVSA has been purchasing light crudes for its Isla refinery at a rate of around 48,000 bpd.
Purchases have included Bonny Light, Qua Iboe, Bonga, Kissanje, Cabinda and Girassol, he said.
“We’ve gotten very good results. Margins are equal or better to processing our own crude,” said Luongo, who declined to give specific estimates.
Royal Dutch Shell, Norway’s company Statoil, France’s Total and Russia’s Rosneft have been selling Angolan, Nigerian and Russian crudes to PDVSA this year, according to traders and Reuters data.
At least 13 cargoes, of 700,000-1 million barrels each, have been delivered to the Curacao terminal.
That crude is substituting Venezuelan oil, which is now freed up to use as diluent in the Orinoco, Luongo said. Demand for diluents should jump around 40 to 45 percent next year from this one, Luongo estimated.
Under a supply contract with Russia’s top oil producer Rosneft, PDVSA can import up to around 35,000-40,000 bpd of Urals crude for lubricating purposes, he added.
Separately, Luongo said a $5 billion Chinese loan destined for Venezuela’s oil industry has been earmarked for many projects including some in the refinery sector.
The slump in oil prices has pushed PDVSA to review its projects, with some likely to be sped up and others halted, he added. There is also an internal push for projects to “finance themselves.”
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