Exclusive-Venezuela PDVSA sells oil only to companies with individual licenses, sources say

By Arathy Somasekhar and Marianna Parraga

HOUSTON, Feb 13 (Reuters) – Venezuela’s state oil company PDVSA has refused to sell oil to companies without individual U.S. licenses for the past two weeks, four sources at the companies that want to buy the goods told Reuters, limiting exports and preventing the country from emptying full storage tanks faster.

Washington last month granted both a blanket license that broadly allows oil exports and individual licenses to traders Trafigura and Vitol to export billions of dollars worth of oil. The permits followed a restricted US license extended to Chevron last year to export Venezuelan crude to the US

Venezuela depends on revenue from oil exports and needs the proceeds from the sale to run its government. The general licenses are intended to exempt the companies from US sanctions on Venezuela’s oil industry, which Washington has eased since the capture of Venezuelan President Nicolas Maduro last month.

However, buyers of Venezuelan oil say the blanket license has not facilitated trade as much as needed. The broad nature of the general license left many terms open to interpretation, raising questions about what is allowed and what is prohibited, the sources said.

PDVSA executives need specific guidance from the U.S. on which companies to trade with and clearer trading terms so they can track cargo and secure revenue, they said.

U.S. banks have also been reluctant to finance commercial Venezuelan oil deals, three sources said, citing the complex nature of the licenses.

“Some banks may not want to risk processing on their basis or may not feel the activity is authorized … banks may do more due diligence,” one of the two sources said.

Banks’ reluctance to finance Venezuela’s oil trade for now will mean little to the world’s biggest traders, which have generated billions of dollars in profits in recent years and are flush with cash. However, it is likely to present complications for smaller players who decide to participate in the Venezuelan oil trade.

The White House told Reuters on Friday that the Trump administration had issued more general licenses at a record speed due to overwhelming interest from oil and gas companies in investing in Venezuela’s energy infrastructure.

“The president’s team is working around the clock to respond to requests from oil and gas companies,” said spokesman Taylor Rogers. The US Departments of Energy and Treasury, as well as PDVSA, did not immediately respond to requests for comment.

The Treasury Department’s Office of Foreign Assets Control on Friday issued two additional general licenses allowing oil and gas producers to operate in Venezuela. The move, which will allow Chevron, BP, Eni, Shell and Repsol – among other companies – to expand their activities was the biggest easing of sanctions targeting production so far.

QUESTIONS ANSWERED FOR THE MOMENT

In a frequently asked questions release posted last week, the Treasury said oil sales transactions must follow commercially reasonable terms, or those “consistent with prevailing market and industry standards.”

It also said that “a financial institution may rely on its customer’s representations that the transaction is in accordance with the terms of (licence) 46, unless it knows or has reason to know otherwise”. He did not elaborate further.

Meanwhile, some potential buyers are also waiting for internal compliance approvals before committing to PDVSA, sources said, as terms are clarified by the Treasury over time and as legal teams study them.

General licenses for the sale and marketing of oil do not currently allow the negotiation of debt repayment with oil cargoes, as previous licenses did. This is a challenge for many of PDVSA’s partners, whose main immediate goal is to recover millions of dollars owed to them.

According to PDVSA’s export schedules updated this week, Vitol, Trafigura and Chevron continue to pick up the lion’s share of Venezuela’s oil exports, despite multiple meetings between the state company and other companies, including refiners in the U.S. and elsewhere, to negotiate direct purchases.

Venezuela’s oil exports rose to about 800,000 barrels per day in January from 498,000 bpd in December, shipping data showed. However, levels remain below last year’s average, which has prevented a massive outflow of stockpiles.

Traders are likely to resell Venezuelan oil to Europe and Asia as US Gulf Coast refiners struggle to absorb a rapid increase in Venezuelan crude shipments after millions of Venezuelan barrels were diverted from China in the past two months.

(Reporting by Arathy Somasekhar and Marianna Parraga in Houston, Nicole Jao and Saeed Azhar in New York, Rob Harvey and Dmitry Zhdannikov in London Editing by Nathan Crooks and Chizu Nomiyama)

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