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Venezuelan State Company Stops Sales of Oil to Exxon (Update3)
2008-02-12 22:30 (New York)By Steven Bodzin
Feb. 12, 2007 (Bloomberg) — Petroleos de Venezuela SA, the state
oil company, cut off sales of crude, gasoline and diesel to
Exxon Mobil Corp. in retaliation for the freezing of $12 billion
in assets in a legal dispute.
Petroleos de Venezuela “paralyzed” sales to Exxon in
response to court-ordered asset freezes, the Caracas-based
company known as PDVSA said in a statement. PDVSA said it will
supply the refinery it co-owns with Exxon in Chalmette,
Louisiana.
Exxon Mobil, which refines more crude than any other
company, won an order freezing $315 million in a Venezuelan
account in the U.S. It was granted a ruling blocking
transactions in the U.K., the Netherlands and Netherlands
Antilles affecting as much as $12 billion in assets pending the
resolution of a dispute over the government’s seizure last year
of a heavy oil project.
“It’s more or less political rhetoric,” Ruchir Kadakia,
an international oil analyst at Cambridge Energy Research
Associates, told reporters in Houston. “It’ll have very little
commercial impact on Exxon Mobil.”
The move probably will cut revenue for PDVSA because it
reduces the number of potential customers and will force the
company’s traders to rely more on middlemen who won’t pay as
much as Exxon Mobil, Kadakia said.`Willing to Talk’
Exxon Mobil was still prepared to talk with the Venezuelan
government and PDVSA, said Senior Vice-President Mark Albers.
“We remain willing to engage in substantive discussions
with the government of Venezuela and PDVSA on the fair-market
value of assets,’‘ he said at a press conference at the
Cambridge Energy Research Associates conference in Houston.
Exxon is claiming more than $12 billion in the arbitration,
according to a company filing in the U.S. District Court.
ConocoPhillips, which is also in arbitration with Venezuela,
wasn’t mentioned in today’s PDVSA statement. Rafael Ramirez, the
country’s oil minister and president of PDVSA, said Feb. 8 that
talks with Conoco were going well and that he expected a
negotiated resolution.
Arbitration will likely take several years, and Conoco
favors negotiations with Venezuela to avoid a legal battle,
Chief Executive Officer Jim Mulva told reporters at the
conference.
“Those talks continue, and we are making progress,” Mulva
said. “I hope that maybe we can come to some kind of solution
in 2008.”
IEA Ready to Act
The International Energy Agency is “prepared to move” oil
from its strategic reserve if the Venezuelan action causes
physical constraints in the oil market, Executive Director Nobuo
Tanaka said in a briefing at the CERA conference.
IEA, a Paris-based adviser to 27 oil-consuming countries,
requires member states to hold oil stockpiles equivalent to no
fewer than 90 days of the prior year’s net imports.
“Venezuelan oil is a very heavy crude, and the demand for
it is in the Gulf of Mexico,” Tanaka said. “So if they have a
program where they try to cut exports to the U.S., that will
choke their own demand.”
Most of Venezuela’s shipments to Exxon last year were to
the Chalmette joint venture, Andy Lipow, president of Lipow Oil
Associates, said today in a telephone interview. The country,
the biggest oil exporter in the Americas, sold about 50,000
barrels a day directly to Exxon and another 78,000 to Chalmette.Exports Aren’t `Huge’
“In the scheme of things, 50,000 barrels a day isn’t a
huge amount,” Lipow said. The Atlantis field that BP Plc has
brought into production in the U.S. Gulf of Mexico will soon
produce 200,000 barrels a day, with characteristics similar to
Venezuelan crude, he said.
Venezuela provided about 1.64 million barrels a day of
crude and products to the U.S. through November last year,
according to Energy Department records. Of that, 1.43 million
barrels a day went directly from Venezuela to the U.S. The rest
arrived via the Hovensa refinery in the U.S. Virgin Islands.
Hovensa is a joint venture of PDVSA and Hess Corp.
Crude oil rose as much as 56 cents, or 0.6 percent, to
$93.59 after PDVSA announced it would stop sales to Exxon.
Venezuelan President Hugo Chavez threatened on Feb. 10 to
cut off oil sales to the U.S., a warning that was widely
discounted by industry analysts in both countries.Disruption `Unlikely’
“We consider any disruption to the U.S.-Venezuela oil
trade as unlikely,” JP Morgan analyst Katherine Spector wrote
in a note to clients today. “A halt in U.S.-bound exports would
ultimately be more devastating to PDVSA than U.S. refiners,
especially if carried out for a sustained period.”
Exxon bought five shipments of Venezuelan crude and another
cargo of refined products in November, according to Energy
Department data. The ships went to facilities in the Texas
cities of Port Arthur, Texas City, and Houston as well as Morgan
City, Louisiana.
Venezuela has a limited ability to cut off oil supply to
the U.S. because most of its crude is heavy and high in sulfur,
making it inappropriate for refining in most of the world’s
refineries.
While Chavez has announced plans for new refineries in
Nicaragua, Ecuador and other countries in order to reduce
reliance on the U.S., the Gulf Coast remains the location of
most refineries able to handle Venezuelan crude.–With reporting by Joe Carroll and Margot Habiby in Houston.
Editor: Alex Devine, John Viljoen.To contact the reporter on this story:
Steven Bodzin in Caracas at +58-212-277-3711 or
sbodzin@bloomberg.net.To contact the editor responsible for this story:
Dan Stets at +1-212-617-4403 or
dstets@bloomberg.net -
New Post on the Venezuela Upgrader Grab – Exxon gets Ruling to freeze $375 million PDVSA assets & Chavez strikes back cutting oil sales to them. Both ConocoPhillips & Exxon continue to express a willingness to negotiate the loss of their assets. But they are also starting to take action to help the process along.
Don’t you love it when the good guys get to score one – and actually get some support from both courts & IEA startegic reserves. This also speaks volumes about the international opinion of Chavez’s actions where there is a long history of counting the true asset of any man or country to be in the honoring of its contracts or word.
Good article by bloomberg – it catches that any action like this that Chavez takes will hurt him & his countries revenue more than his customer and that while the volumes are important they can be darwfed by the size of new fields like the BP one stated, that are coming online (ie -50MBD cut Exxon, BP new field +200MBD).
Never get Crazy mixed up with Stupid however……. Chavez has been selling VLCC cargoes to China that was part of his 300MB/year contract, and placing some of it as Fuel Oil sales. Some of the original Upgrader JV Crude sales had linkage to HFO market or was priced close to the 75% WTI values that trend USGC No.6 3%S prices.
Today with No.6 approaching 80-85% WTI which is also at record prices may netback better values. And while China does not have the refining capacity to utilize all the heavy crude they do have a butt load of ships needing bunkers as they import feedstocks & export products.
Regards
Charlie Randall -
Here is Update (4) on Exxon Chalmette vs PDVSA asset freeze – Crude cargoes rejected by XOM
Venezuela, Exxon in refinery supply talks
CARACAS (Reuters) 3/01/08 – Venezuela is in talks with Exxon Mobil over supplies to the Chalmette refinery, the oil minister said on Friday, amid an escalating legal battle between the OPEC nation and the U.S. oil giant.
Venezuela cut commercial ties to Exxon after it won court orders freezing up to $12 billion (6 billion pounds) in Venezuela’s assets but promised to honor a supply contract with Chalmette — a joint venture between Exxon and Venezuelan state oil company PDVSA located in the U.S. state of Louisiana.
“There has been, with respect to the Chalmette refinery, the intention by Exxon to ignore the supply contracts — an issue we are discussing,” Ramirez told reporters.
An industry source told Reuters that Exxon had rejected several cargoes from the Petro Monagas heavy oil project, formerly the Cerro Negro heavy crude upgrader that Exxon ran until its nationalization last year.
“A couple of cargoes have been pushed back for not meeting the quality specification,” said the source, who spoke on condition of anonymity. He said Chalmette, which receives most of its crude from the Petro Monagas project, was receiving less than it normally does from the project.
But he said this may have been related to maintenance at the 192,000-barrel-per-day Chalmette, which in January began two months of planned maintenance to add new environmental controls.
The cargo rejections do not necessarily reflect operational problems at Petro Monagas, the source added, because PDVSA may have incorrectly described the specifications of the crude being offered.
Exxon has filed two arbitration suits seeking at least $5 billion in compensation for Venezuela’s takeover Cerro Negro as part of leftist President Hugo Chavez’s nationalization crusade meant to advance his self-styled socialist revolution.
PDVSA is challenging a London court order on the temporary asset freeze, arguing the move was “weird” and based on “fantasy. “Venezuela’s deputy energy minister has told local media that the government has considered offering its stake in Chalmette as compensation for Cerro Negro assets.
(Reporting by Brian Ellsworth; Editing by Christian Wiessner) -
Here is recent update on XOM rejected crude for Chalmette from PDVSA JV Upgrader Cerro Negro. Wonder how much net back revenue hit Chavez is taking? :
Venezuela says all Chalmette oil sent to China
Budapest Business Journal – Mar 30, 2008 11:05 PM
Venezuela is sending to China all the oil it previously shipped to a US refineryhttp://www.bbj.hu/main/news_37865_venezuela+says+all+chalmette+oil+sent+to+china.html
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