PDVSA and China’s state-run CNPC have stopped all oil blending at their joint venture operation, Petrosinovensa, exclusive Reuters sources divulged on Thursday. PDVSA holds 50.1% of the JV, while CNPC holds the remaining 49.9%.
PetroSinovensa blended extra-heavy crude oil from Venezuela’s Orinoco belt with lighter grades such as Mesa and Santa Barbara, creating what is known as the Merey blend, 100% of which were shipped to China, Argus Media reported over the summer. Over half of the finished product went toward paying back loans that China extended to Venezuela and PDVSA.
The oil blending operations were halted this week due to an untenable buildup in oil stocks in Venezuela as the United States continues to clamp down on the Maduro regime in the Latin country, in what will surely create a ripple effect on other operations in Venezuela as well.
The operations at Petrosinovensa was until now the last man standing, as the country’s other oil blending joint venture, Petropiar, already stopped its blending operations earlier this year, also under the weight of growing oil product inventories.
PetroSinovensa had in July completed an expansion of the blending facility to 165,000 barrels per day, up from 105,000 barrels per day. The expansion cost $4 billion, which was financed by the China Development Bank which loaned the $4 billion to PetroSinovensa.
CPNC and PDVSA had also planned on expanding Petrosinovensa, but those plans have now been suspended, Reuters sources claimed.
It is unclear what the blending operation’s closure means for Venezuela’s future loan payments to China.
Venezuela’s oil industry has been on a downward spiral for years, although its September oil exports managed to increase slightly to 845,000 bpd from August levels of 770,000 bpd. Much of this oil went to Cuba.
By Julianne Geiger for Oilprice.com
