Eni and Repsol could start shipping in July, resuming oil-for-debt swaps, say sources
05 June 2022 - 19:52
byMarianna Parraga and Matt Spetalnick
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An oil tanker outside the Puerto La Cruz oil refinery in Puerto La Cruz, Venezuela. Picture: REUTERS/ALEXANDRA ULMER
Italian oil group Eni and Spain’s Repsol could start shipping Venezuelan oil to Europe next month to make up for Russian crude, resuming oil-for-debt swaps halted two years ago when Washington stepped up sanctions on Venezuela, said five informed sources.
The volume of oil Eni and Repsol are expected to receive is not large, said one of the sources. Any effect on global oil prices will be modest. But Washington’s green light to resume frozen Venezuelan oil flows to Europe could give Venezuelan President Nicolas Maduro a boost.
The US state department gave the nod to the two companies to resume shipments in a letter, the sources said.
US President Joe Biden’s administration hopes the Venezuelan crude can help Europe cut dependence on Russia and redirect some of Venezuela’s cargoes from China. Coaxing Maduro into restarting political talks with Venezuela’s opposition is another aim, said two of the sources.
The two European energy companies, which have joint ventures with Venezuelan state-run oil group PDVSA, can count the crude cargoes towards unpaid debts and late dividends, the sources said.
A key condition is that the oil received “has to go to Europe. It cannot be resold elsewhere.
Washington believes PDVSA will not benefit financially from these cash-free transactions, unlike Venezuela’s oil sales to China, the source said. China has not signed up to Western sanctions on Russia, and continued to buy Russian oil and gas despite US appeals.
The authorisations came last month, but details and resale restrictions have not been reported previously.
Eni and Repsol did not immediately reply to requests for comment.
Firms excluded
Washington has not made similar allowances for US oil major Chevron Corporation, India’s Oil and Natural Gas and France’s Maurel & Prom, which also lobbied the US state department and Treasury to take oil in return for billions of dollars in accumulated debt from Venezuela.
All five oil companies halted swapping oil for debt in mid-2020 in the midst of former US president Donald Trump’s “maximum pressure” campaign that cut Venezuela’s oil exports but failed to oust Maduro.
PDVSA has not scheduled Eni and Repsol to take any cargoes this month, according to a June 3 preliminary PDVSA loading programme seen by Reuters.
Venezuela vice-president Delcy Rodriguez tweeted last month that she hoped the US overtures “will pave the way for the total lifting of the illegal sanctions which affect our entire people”.
The Biden administration held its highest level talks with Caracas in March, and Venezuela freed two of at least 10 jailed US citizens and promised to resume election talks with the opposition. Maduro has yet to agree on a date to resume talks.
Republican legislators and some of Biden’s fellow Democrats who oppose any softening of US policy towards Maduro have criticised the US approach to Venezuela as too one-sided.
Washington maintains further sanctions relief on Venezuela will depend on progress towards democratic change as Maduro negotiates with the opposition.
Last month, the Biden administration authorised Chevron, the largest US oil company still operating in Venezuela, to talk to Maduro’s government and PDVSA about future operations in Venezuela.
About that time, the state department secretly sent letters to Eni and Repsol saying Washington would “not object” if they resumed oil-for-debt deals and brought the oil to Europe, one of the sources told Reuters.
The letters assured them they would face no penalties for taking Venezuelan oil cargoes to collect on pending debt, said two people in Washington.
Chevron’s request to the US Treasury to expand its operations in Venezuela came as the state department issued the no-objection letters to Eni and Repsol. The person familiar with the matter in Washington would not say whether Chevron’s request remained under consideration.
The US oil major did receive a six-month continuation of a licence that preserves its assets and US approval to talk with Venezuelan government officials about future operations.
It was not immediately clear if Washington approved crude-for-fuel swaps European companies conducted with PDVSA until 2020, exchanges that provided relief to petrol-thirsty Venezuela.
China has become the largest customer for Venezuelan oil, with as much as 70% of monthly shipments going to its refiners.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
US gives nod for Venezuela to send oil to Europe
Eni and Repsol could start shipping in July, resuming oil-for-debt swaps, say sources
Italian oil group Eni and Spain’s Repsol could start shipping Venezuelan oil to Europe next month to make up for Russian crude, resuming oil-for-debt swaps halted two years ago when Washington stepped up sanctions on Venezuela, said five informed sources.
The volume of oil Eni and Repsol are expected to receive is not large, said one of the sources. Any effect on global oil prices will be modest. But Washington’s green light to resume frozen Venezuelan oil flows to Europe could give Venezuelan President Nicolas Maduro a boost.
The US state department gave the nod to the two companies to resume shipments in a letter, the sources said.
US President Joe Biden’s administration hopes the Venezuelan crude can help Europe cut dependence on Russia and redirect some of Venezuela’s cargoes from China. Coaxing Maduro into restarting political talks with Venezuela’s opposition is another aim, said two of the sources.
The two European energy companies, which have joint ventures with Venezuelan state-run oil group PDVSA, can count the crude cargoes towards unpaid debts and late dividends, the sources said.
A key condition is that the oil received “has to go to Europe. It cannot be resold elsewhere.
Washington believes PDVSA will not benefit financially from these cash-free transactions, unlike Venezuela’s oil sales to China, the source said. China has not signed up to Western sanctions on Russia, and continued to buy Russian oil and gas despite US appeals.
The authorisations came last month, but details and resale restrictions have not been reported previously.
Eni and Repsol did not immediately reply to requests for comment.
Firms excluded
Washington has not made similar allowances for US oil major Chevron Corporation, India’s Oil and Natural Gas and France’s Maurel & Prom, which also lobbied the US state department and Treasury to take oil in return for billions of dollars in accumulated debt from Venezuela.
All five oil companies halted swapping oil for debt in mid-2020 in the midst of former US president Donald Trump’s “maximum pressure” campaign that cut Venezuela’s oil exports but failed to oust Maduro.
PDVSA has not scheduled Eni and Repsol to take any cargoes this month, according to a June 3 preliminary PDVSA loading programme seen by Reuters.
Venezuela vice-president Delcy Rodriguez tweeted last month that she hoped the US overtures “will pave the way for the total lifting of the illegal sanctions which affect our entire people”.
The Biden administration held its highest level talks with Caracas in March, and Venezuela freed two of at least 10 jailed US citizens and promised to resume election talks with the opposition. Maduro has yet to agree on a date to resume talks.
Republican legislators and some of Biden’s fellow Democrats who oppose any softening of US policy towards Maduro have criticised the US approach to Venezuela as too one-sided.
Washington maintains further sanctions relief on Venezuela will depend on progress towards democratic change as Maduro negotiates with the opposition.
Last month, the Biden administration authorised Chevron, the largest US oil company still operating in Venezuela, to talk to Maduro’s government and PDVSA about future operations in Venezuela.
About that time, the state department secretly sent letters to Eni and Repsol saying Washington would “not object” if they resumed oil-for-debt deals and brought the oil to Europe, one of the sources told Reuters.
The letters assured them they would face no penalties for taking Venezuelan oil cargoes to collect on pending debt, said two people in Washington.
Chevron’s request to the US Treasury to expand its operations in Venezuela came as the state department issued the no-objection letters to Eni and Repsol. The person familiar with the matter in Washington would not say whether Chevron’s request remained under consideration.
The US oil major did receive a six-month continuation of a licence that preserves its assets and US approval to talk with Venezuelan government officials about future operations.
It was not immediately clear if Washington approved crude-for-fuel swaps European companies conducted with PDVSA until 2020, exchanges that provided relief to petrol-thirsty Venezuela.
China has become the largest customer for Venezuelan oil, with as much as 70% of monthly shipments going to its refiners.
Reuters
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