Our friend Marianna Párraga of Reuters published a major scoop yesterday: Venezuela is exploring the idea of importing crude oil for the first time in its history. Read it here. Now, I’m no oil expert, but a few questions pop into my head:
- The story makes for interesting headlines, but as we evolve from a light-crude producer to a heavy-crude producer, wasn’t this bound to happen at some point? Venezuela needs the light crude to mix it with its heavy crude in order to extract the latter, which is kind of like tar in its consistency and, hence, difficult to pump. Previously, the country was using processed products (such as a variant of gasoline), but given the ongoing crisis in our refineries, we were having to import these at massive prices. Why, then, don’t we use our own light crude for this? I guess that is the real question here. Is it incompetence? Is it simply that light crude wells are running out? And whatever happened to the Tomoporo field in Zulia, the largest find of light crude in western Venezuela in decades? Finally, why can’t we come up with more clever ways to exploit our heavy-oil resources?
- One has to wonder why Venezuela has not built more refining capacity inside the country. Venezuela famously ships its crude to places such as Mary Landrieu’s backyard and El Pollo Carvajal’s happy island, but why aren’t we refining more of our crude here at home? Some people say the refining business has small margins and, hence, is not a good use of money. I say – refining generates knowledge, and only knowledge will get us out of this mess. Venezuela needs a comprehensive downstream oil policy, one that includes private actors and allows them to open up their own refineries. Instead of importing products, we need to export more of them, no matter the margin. That is where the know-how is.
- Psychologically, these news could not come at a worst time for Maduro. As the country reels from a general feeling that things are not going well, we get the news that we are now importing oil. Never mind that we have the largest reserves in the world. Never mind that we still export a lot of oil. Leave all the technical mumbo-jumbo aside. We. Are. Importing. Oil… Tell that to a doñita standing in line for four hours waiting to get milk. Tell that to a professional who can’t find the medicine he needs. There’s simply no way of spinning this favorably. The idea that we are now both members and customers of OPEC is simply too much for the average Venezuelan to swallow. It provides a nifty soud-bite for the opposition, one that pretty much everyone understands.
As we digest these news, we have to wonder if this is rock bottom. ‘Cause if it isn’t, it sure feels like it.
Caracas Chronicles 
Nothing to see here, walk on…….
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Plenty to see and read here from knowledgeable people…..keep reading to the end.
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I’m not the expert, but as I understand, none of this was ever inevitable. It’s a result of PDVSA failures. Some of the developments that could have made imports unnecessary:
-More and better upgraders and refineries, as you mention.
-Quicker development of gas fields, especially those with lots of condensate, which is a fine diluent.
-Construction of sugar fields and ethanol refineries, long announced and maybe even paid for but never brought on line
-Maintenance & stimulation of light oil fields, which have suffered especially since the big services nationalizations of 2008-09
-I’m not sure but I think lower motor fuel consumption would also free up some light products that could be used as diluents
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“It is a result of PDVSA Failures”
PDVSA is not some mythical entity; it is made of people. Between 2002 and 2003, approximately 75% of the management was purged, and replaced by people who were chosen more for their ability to tow the partyline, and not for any oilfield management skills. Not that I am saying that the strikers were heroes, but wiping out the management is agood way to wipe out your company.
“More and better upgraders ”
How is this going to happen after Intevp was basically shut down.
“Construction of sugar fields ”
What does this even mean? Sugarcane is grown by farmers. In Venezuela, farming and agriculture has been going down as long as oil was drilled.
‘Maintenance & stimulation of light oil fields, which have suffered especially since the big services nationalizations of 2008-09″
It is not straightforward; if you have no engineers and managers, and you have no maintenance budget, you cannot maintain anything
State government ownership i a great killer of maintenanc and engineering construction.
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You are not altogether wrong in your assumptions. But Venezuela has commitments to OPEC as it has to its customers and suppliers in this business. Pumping as much as you can out of the ground is not good economics either. It is what gives the Russians and Americans a heavy hand over all other producers; The US nudges the Saudis to pump beyond their OPEC limits into the black market. The Russians do not account to anyone. Venezuela is a country without the political clout and is often being frustrated by the US which is not a conspiracy theory but documented fact.
Having said all of that one must also blame the Venezuelan government and its opposition for being extreme where the economic development of the country is concerned. If you need a coup to come into power there is something fundamentally wrong with your party.
The opposition slavishly looked after the US and a select few in their midst whilst the Chavezistas went overboard appointing the politically correct of unionists and women and others who know little about economics other than Marxist economics. All in all the country is full of opportunists and not enough good leaders.
It takes PDVSA and the various Venezuelan missions abroad months to simply answer to an email. That spells disaster for the country. What Venezuela needs to do is what Iran has done, it sells its oil to larger developing countries the US can’t bully like India who then on sells for Greenbacks the Iranian oil it can’t use keeping the country aline. This is trade and not political ideology.
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That’s a fantastic piece of reporting by Marianna.
I’d only add to the points you discuss above, Juan that, yes, to make our crude more commercially attractive you can mix it with naphtha (as we’ve been doing now) or with lighter crudes (as we did with our own oil and will now apparently do with the Algerian variants).
But you to do this you need facilities called upgraders. We have a few in Venezuela, but our upgrading capacity is insufficient (http://blogs.platts.com/2013/11/25/pdvsa-woes/) and investment in new capacity in non-existent.
You can import (or make, if we could at our destroyed refineries) all the naphtha you want or use all the lighter crude you want to mix in with the bitumen, but if you don’t have the facilities, it won’t do you any good. And that’s where we are.
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Importing crude from Algeria is something that has basically been known since earlier this year when PDV leased the tanks at St Eustatius. One of the principal reasons to do this was to run a blending operation. And, since the Chinese haven’t really expanded their refining capacity yet for heavy Venezuelan crudes if Venezuela is going to ship more crude to China they need to blend.
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Wasn’t Orimulsion meant to be used for this?
Anyways, well done to the red disease…. In any moment we will start importing mangoes from Pakistan…
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Not at all, orimulsion was meant to be a cheap – and very contaminating – replacement for coal, on times when oil prices didn’t offset the high costs of transforming heavy oil to a most palatable oil mix.
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Thanks for clarifying, I remember orimulsion was big in the late 90’s. I alays wondered why with all the changes in the oil industry, that project was abandoned
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I always sorry…
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I guess some guy called Bernard Mommer decided to shut down all the orimulsion-related stuff just saying it was “una moda pasajera”
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….to have access to even more Chinese loans, to get deeper in debt with China, and to have even less money to deal with the economic problems. Fully between 25-30% of Venezuelan oil shipped to China is used solely to pay off loans, not to gain income. Even the shipment costs of oil shipped to China is discounted for them because of the great distance. The recent agreement with China was more oil for China for even MORE access to Chinese loans, NOT for income. Couple that with all the free oil sent to Cuba and other political allies and the subsidization of the sale of gas to its own citizens and its blatantly obvious why Venezuela’s a basket-case with no future.
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That’s incorrect. St Eustatius terminal is being used to produce diluted crude oil (DCO) made of crude and naphtha. No light crude import has been made by PDVSA from there…
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I’ve always thought that refining somewhere else was a great idea. In Venezuela we only need refining capacity to meet local demand. The rest should be refined somewhere else, if margins are low (that is also my understanding), you bring back profits (even if you have to pay taxes and employ people abroad), and we are good to go.
The environmental consequences of refining to me simple outweigh any other benefit. I think.
It’s not like we have not been able to dodge taxes in other countries to bring profits, and although refining jobs are relatively well paid, I don’t think that they are activities considered “labor intensive” anyway. -I stand to be corrected on the last sentence-.
You do bring a valid point in regards to the know how behind the refining business. In this regard, nothing really forbids us to pay professionals (Venezuelan or otherwise) in the USA via CITGO and have them work for PDVSA in Vzla, or come back and forth. Many other oil companies do that and write off the expense… same as bringing tankers, planes, and drilling equipment…
Should we import oil? If we need it to “dilute” the heavy crudes why not? theoretically if the oil is exported again and we only “lose” in transport… as long as it is not squandered by giving it for free locally I see no issue with importing oil.
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But if PDV is buying Algerian crude to mix to meet rising Chinese demand to payback loans then isn’t this a net loss as PDV is expending dollars and getting nothing in return as the government has already expended the loans.
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True, but we still have to pay the loans right? I see no difference here in importing a knock down kit for a car, assembling it in Venezuela and then EXPORTING them.
If the money resulting for the export goes to pay a loan, I could care less…we have to service the debt anyway, and the money or the oil needed to service the debt has to come from somewhere.
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It is a net loss in the same way that paying your credit card bill is a net loss. You’ve already enjoyed the trips, restaurants, clothes, etc, but now you have to pay up.
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Paying a credit card bill, in this hyperinflationary economy, is actually saving you money, because money losses its value faster than the credit rates can go up.
I mean, my father bought a TV and a kitchen for his house last year that way, and now both appliances cost like 7 times as much as that day.
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If they had built the upgraders, these imports would not be needed. It is the least profitable possible outcome to mix light crudes with heavy stuff in order to sell it. The upgraders did not get built because PDVSA did not fulfill its side of either investing in the projects or putting up the money. Thus,. they get the heavy crude out, add the light one and export it. Sad, truly sad. No justification whatsoever. Similarly, as pointed out by Setty above, PDVSA stopped investing in maintenance in the West and light oil production from these wells dropped significantly. In fact, one of the biggest criticisms internally of Ramirez is how could he have allowed this to happen in order to “sell” long term heavy oil crude projects as an achievement.
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I do not think it is a coincidence that this idea is being floated at the same time as Citgo is for sale. There must be a connection.
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Unless Venezuela sells off CITGO, as Ramirez has hinted.
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“We. Are. Importing. Oil”
As I understand it we’ve been importing great gobs of refined gasoline at world prices for some time now.…
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But the masses don’t know, or the chavista masses, to be precise.
Try telling them that, and they’ll deny it crazily, because accepting that truth destroys their loyalty for the rottenvolution.
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Yes, we have been importing refined products for a while, but the country had never imported crude oil.
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The psychological effect of importing oil will be massive. Even in Colombia which depends much less on oil the fact that we’re a net exporter but import oil for our gas (a similar story about crude types and refining capacity) leads to outrage every other month when gas goes up. How can it be that we buy gas from los gringos if we export oil?! There’s a huge myth that Colombia has the most expensive gas in the world, which is ridiculous, we’re pretty much middle of the pack for the region.
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The psychological effect will be massive in el municipio chacao, not in Catia.
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That’s right!
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You just have to learn to aim the message.
Saying to poor chavists in Catia that “there’ll be less cash to pay the missions, the mommy dearest legacy of the colonoscopic commander because maduro has to import even more oil than before” creates a psycho-bullet for them, who are voting red mostly by the cash they’re getting.
It seems that nobody oudside chavismo wants to use their very own best weapon with a twist against them: Manipulative rethoric, but coming from a truth instead of being fabricated from a blatant lie.
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Canada as I understand it exports roughly the same quantity of crude oil per day as Venezuela, but it also imports a significant amount (one figure I found for CDN was 2.5 million barrels exported, 640,000 imported). I don’t think it is unusual that major producers are also importers, but I don’t understand exactly why that is the case. I imagine it is like someone who has solar power who also taps into the grid in off peak hours, or something like that. That is my uninformed guess.
I do agree that rock bottom has been hit though….maybe not sure this is one of the reasons….clearly the regime is having difficulty keeping the refineries it has from blowing up, much less build new ones.
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Canada is very particular. It imports oil for it’s eastern refineries while it exports from its western ones. There is talk about the differential in price paid due to the types of crudes involved… (west is cheap heavy, east is lighter more expensive). It seems to make economic sense given the geography and market size, at least that has been my understanding.
I see no problem importing anything if you will export it again… in the Canadian experience maybe that differential is not as substantial as building and maintaining pipelines and refineries for such a small market. Maybe someone more knowledgeable can chip in.
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Makes sense to me. Jeez there is a wealth of knowledge on this blog.
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The decision to import in the East of Canada and export from the West was an economic decision made some 40-50 years ago, comparing this alternative to a trans-Canada pipeline. So Canada became one of Venezuela best friends, for this and also for tourism in Margarita. Some Canucks still dream of Pampero. Not anymore, ask that old piece of trash of JVR, Canada is now undermining the revolucion bonita. I doubt it but I wish it were true.
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I read that heavy oil is refined in special refineries, and the same goes for tar sand oil. Canada doesn’t have much of that type of refinery capacity, especially in eastern Alberta… hence the need for pipelines. Also, Citgo has three refineries, and the regime is selling the one that does not process heavy oil. That makes sense.
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As I understand it, Venezuelan crude needs to be mixed with light crude before it can be used.
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An upgrader does not produce refined products from the processing of extra heavy crudes , it produces a lighter synthetic crude from the processing of extra heavy crude which can then be refined into refined products . to produce refined products from the processing of extra heavy crudes you need both upgraders and refineries .!!
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Nafta is used to dilute the bitumen in-hole, the mix is carried from Faja to Jose, and, it is supposed to be separated from the heavy and used again. So we have a circulating nafta circuit of 600 km and 32″ diameter and all the holes full of nafta. If your converter is not working, and you want to export a light crude, best offer, via Ali-Baba, you just let it go with the nafta, and voila, miracle! the circle is depleted until there is not enough nafta in the world to make a half and half in PLC.
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The advantage of using nafta to transport the extra heavy crude from the producing fields inland eastern venezuela , where the upgraders are sited and then separating the nafta from the crude and sending the naphta back to the fields to repeat the operation in a neverending cycle is that then the upgraders can be built in the coast where there are already built roads , and electrical power grids and water mains and homes and buildings and an existing infrastructure which make the building and running of the upgraders cheaper and easier . While if the upgrader is build next to the production site where all those things dont exist , then to the cost of building the upgrader itself must be added the cost of building all that surrounidn infrastructure from scratch which makes the whole cost much higher . !!
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And that is why the regime started to buy like crazy all the media, to censor everything and stop these news from reaching the public.
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Venezuela has always had much more extra heavy crude than conventional light medium crude reservoirs , because the former were easier to produce refine and could be sold at higher prices production of the latter was usually posponed . ( In any business you prioritize investment in the project which brings you the higher return) . As oil prices climbed the exploitation of extra heavy crude became more potentially profitable , In the 90’s Pdvsa initiated the big scale production of Oricono EHCO with the help of international partners . ( The four faja associations each with its own Upgrader ) .
Problem with EHCO is that its more costly difficult to produce and can only be transported and generally marketed by mixing it with lighter crudes or with refinery produced diluents or by processing it in upgraders to transform it into a synthetic crude which properties are closer to those of conventional crude.
As production of conventional crudes declines ( and light medium crude reservoirs are depleted) Venezuela needs to resort to one of the three formulas to begin substituting the lost production with the production of EHCO This process of declining Light medium crude production has worsened because of Pdvsa mismanagement of some of the light medium crude reservoirs . (more of that in a separate text) .
Now its become urgent for Venezuela to start strongly increasing its production of EHOC and the manner in which it can be converted into a markteable crude oil is become a critical issue. If you trie and mix it with refinery produced diluents , refineries have dropped their production and dont produce enought to mix with the upcoming production which requires importing those diluents at a very heavy price , which of course takes away from its profitability .
If you build Upgraders these now carry a huge price tag and take years to build and of course the help of international oil companies . its estimated that a 200.000 bl a day upgrader costs between 12 and 18 billion US$ ( the same might be brought by the sale of Citgo which produces 650.000 per day of finished refinery products) . We are talling them of gradually having to build some 6 to 8 new upgraders to keep our production going . PDVSA of course hasnt got the money nor the management expertise to build these Upgraders .
The third alternative is to mix the EHCO with light or medium crude oil ( about 30% light crudes 70% EHCO) , Venezuela no longer has the production of conventional crudes which it would have to use to transform its EHCO production into a marketeable crude so its has to buy that light crude abroad bring it to Venezuela for mixing with the local EHCO production .
This is a huge challenge for Pdvsa to ensure Venezuela in future retains an oil export income such as has been received in the past other wise Venezuelas benefits from its export oil income will chronically become a percentage of what its always been .
Ive mentioned this topic several times in the past, in fact Ramirez already mentioned about a year about that Venezuela would in future have to import crude from abroad , nobody paid it much attention . the an isolated piece of news appeared in which it was announced that PDVSA was renting the storage and terminalling facilities at the island of St Eustatius,a sign that it was preparing for the mass purchase of international oil and needed a place in which to store it .
This can totally change the panorama and outlook of Venezuelas oil industry as the endless source of income for the coutnry that its traditionally had !! This is big big challenge for Venezuela .
On the subject of the use of EHCO for the manufacture of Orimulsion thats a different story which someday will have to be told .!!
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Bill,
Please comment on the Orimulsion story whenever you have time … Specially Mommers involvement …
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As I am ignorant in this matter, what’s the prize of the oil -and transport- PDVSA will be importing and the margin when it exported the not-so-heavy one mixture?
Any number has been calculated?
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If you mix the extra heavy crude oil with imported crude oil you have to subtract the cost of buying the imported light crude , the cost of transporting it to the blending point , and the cost of blending it with the extra heavy crude from the income you get from selling the mix , there is also the element of time while the whole thing is done and the extra heavy crude oil sold . It also means having to sell bigger volumes to get the same volume of extra heavy crude oil marketed. It will take a bite from the income obtained by selling the extra heavy crude component of the mix. Depending on the properties and API of the light oil used in the mix the percentage of light crude might reach 30% or so.
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Isn’t it also more expensive to get this heavy crude out of the ground? I heard that hot steam is used in the extraction process and that the Chinese and other contractors do not have this know-how. Furthermore, what do you know about Colombian crude? Is the Colombian oil also the extra-heavy crude?
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Thanks!
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I agree with you Juan. Output of medium and light crudes has been declining, especially since the Norte de Monagas region -Venezuela’s second largest- started declining faster in 2013. This was an expected situation. Those field have been overproduced for a long time, since PDVSA tried to recover its crude production after the strike. This is the consequence. To build refining capacity wouldn’t solve the problem because extraheavy crudes from the Orinoco belt cannot be directly run into refineries. We need upgraders for that and old upgraders are working with problems, while new upgraders planned face long delays. To import crude is, surprisingly, Venezuela’s best option for the short term but it is also the consequence of decades of lack of investment, mismanagement, bad political and economic decisions and the lack of a commercial view
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In north monagas certain medium crude oil fields required a certain level of constant pressure to be maintained to ensure the oil in the reservoir would be able to flow in the future , the level was allowed to fall 35% below the remommended pressure level which led to parts of the reservoir becoming clogged and the oil in that part of the reservoir imposible to extract . The loss of productive capacity of that reservoir is irreversible . It is one of the largest medium crude oil reservoirs in Venezuela . To keep the reservoirs capacity for future production fully open Pdvsa had to make a number of investments , the money was spent elsewhere (probably on political campaigning) and now we suffer the consequences. There are many stories like this one but no one to tell them !!
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Yep,
In many formations, if you pump too hard, you exceed the permeability limit, the pressure drops enough around the well that the rock can no longer bear the geostatic pressure, the porosity collapses and you are thoroughly fucked. The well and a good chunk of the reservoir around it are irretrievably shot.
Then, nothing can be done to revive the field, short of horizontal drilling and large scale fracturing, just like in a shale reservoir, oh, irony, a technology mostly developed and used in the US…
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Thanks, I actually did not know the difference between refiners and upgraders. I think I have a better idea about it now.
And thanks for commenting Marianna! Great piece.
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Mariana, can I just say something? You rock! I am always happy to read good reporting pieces, but when it’s from Reuters (where I still have dear, dear friends) and from a Venezuelan journalist and about the things that matter, it makes me even happier.
Sorry everyone else, just needed to get the cheerleader in me to speak in one comment today ;-)
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Thank you very much Moraima! :)
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PDVSA imports some oil? It could be true in orde to mix with heavier crude for refining. As long as PDVSA does not become a net importer of crude then there is litle to worry about – except in the head of JC of course.
PDVSA isin position no 41 on the Fortune Global 500 which sets everyone’s mind at rest.
JC – for how many years have you been trying to prove that PDVSA is bankrupt? 12 years, correct? And you are still wqaiting.
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Find me a place where I’ve said PDVSA is bankrupt.
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Pdvsa is flat broke , it owes its contractors, international suppliers and investment partners more money than it has , at times its even accummulated a large tax debt with the regimes tax authorities . It cant make the investments it needs to make to keep the oil flowing because it doesnt have the money , its maintained financially through billions in BCV loans which BCV makes by printing money The borrowing terms it must accept are those of debtors who are close to broke . Pdvsa Long term bonds carry a 53% discount on their facial value . Despite that as we speak its issuing new debt at very unfavourable terms !!
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The revolution will be complete when Cuba imports sugar. The revolution will be complete when
Venezuela imports ?
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Complete when it imports oppo’s.
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Que es mas caro??? Un barril de Cacao o un Barril de Petroleo Refinado…..del bueno, el que te provoca oler y bajar los vidrios del carro. No se aquí ya la industria Petrolera tiene para mi una sola salida y son los amables Arabes que hacen islas de la nada. SI ayuda. Pero noooooo, los gringos siguen comprando y nosotros seguimos dando y ellos siguen refinando en EEUU. Bueno ya, basta. Los Arabes que hacen Sky scrappers finos y hacen cultura de La Arena es la solución. Por lo menos que nos den el antídoto, a ver si los Venezolanos comenzamos a aprender de los mejores del momento, y no compararnos con los peores ni los que se consideran mejores pero cada vez hunden mas a su Pais. No es sobre política, es sobre una Empresa que podría ser emprendedora para una verdadera construccion en realidad una rehabilitación para cualquier Venezolano. A todos nos arrastra esta marea. We are playing the Russian Rulet and yes, it will back fire to everybody, unless we as Venezuelans realize that we have to deal with our problems in our own unique ways. With the help of the well educated but with the hands of the Venezuelan People.
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Los Arabes hacen las islas de arena y la tierra que tienen con la inversión de petroleo vendido para crear una infracstructura, no para puros usos politicos.La cultura es una mixtura del suyo própio y de los extranjeros con quienes trabajan con la tecnologia requerida. La mano de obra es mayormente extranjero. El antidoto para Venezuela es muy simple – invertir en su infraestructura y en el mantenimiento de su indústria petrolera, algo que Venezuela casi no hace porque la mayoria del dinero es robado por los Boliburguesas, regalado (en forma de petróleo si uno no cuenta la mayoria de las reservas del país y mucho de las grandes reservas de oro y efectivo que Chavez regaló a Cuba), y usado para pagar los préstamos imensos a China. Lo que sobra es usado para proyectos politicos y para las importaciones de casi todo porque Venezuela ya casi no produce nada por las expropiaciones pasadas y la destrucción de sus indústrias (como lo hizo Zimbabue) y su inhabilidad de pagar los suplidores extranjeros de materia prima para los pocos que todavia tratan de producir.
No….unless things change drastically with the Venezuelan government, the Arabs don’t have any magic answers nor solutions for Venezuela.
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That’s utter BS.
High added-value refining, of the kind required to fully process Orinoco crude to finish products, has gross margins in excess of 30% and simple payout times of less then 3 years. It’s a tough business to start up, but once it’s up and running, it’s a cash cow of phenomenal proportions. Just ask companies running heavy oil upgraders in Alberta.
But it requires reliable access to capital, technical competence, business credibility and long-term commitment, all things which are about as commonplace in Venezuela as scented triple-ply quilted ultra-soft toilet paper with moisturizing lotion :-)
So, for this type of projects, Venezuela can kiss its own ass all the way to the Rio Grande…
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Oil is a fickle business , sometimes you make comparatively more money from the refining of crude than from the selling the unrefined crude , sometimes its the other way round , depends on the type of refinery and the type of crude and the market variables which can change a lot from season to season , from year to year. .
What refining does give you is flexibility to market the oil in the best possible terms in a market thats changing all the time , Sometimes and in some places its easier to sell the product than the crude and if you have no refining capacity you cant enter that market which perhaps can be highly profitable .
Building a refinery in the US is much cheaper than building it in Venezuela (by a factor of about 3 to 1) because the special transaction costs are very high in Venezuela and labour is much less productive . also it can be done much quicker if the permitting is dealt with efficiently .
Also very important is that having refineries in the market country usually facilitates the logistical built up of a marketing system inside the country which can make placing your product in that country much more profitable . Citgo for example is probably worth more as a marketing system than as a group of refineries.
Structuring a well run oil company includes having a crude producing capacity , refineries both in the producing country and in the country of marketing , and a marketing system in the latter in a combination which is specific for the circumstances of each company, Thats what made Pdvsa so special , it had the means for maximizing profits expertly using its different facilities and resources in different countries. Now of course all of that is lost. .
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Last night the Universal reported from sources inside the industry that Pdvsa was suspending all extra heavy oil crude ‘blended’ shipments for the month of september and that it was planning to store the crude it wasnt selling in hired storage tanks through out the Caribbean . This can means a real crisis for Pdvsa’s finances because if the oil is not being shipped its because they are running out of diluents to blend it with , which can imply a big drop in revenues until the problem is solved. !! The purchase of algerian light crudes starts making a lot of sense .!!
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Correction to above : the shipments being suspended are those for october not september .
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This is the link: http://www.reuters.com/article/2014/08/29/oil-venezuela-exports-idUSL1N0QZ2HR20140829 PDVSA realized it was not indexing imported naphtha costs to DCO prices. That’s the reason. But if PDVSA now tries to increase DCO prices while competing with Colombian blends in the U.S. market, it will be really difficult for them to sell,unless Citgo absorbs them all…
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The technology to lighten the heavy crude has existed for some time now. It does not require the import of light crude to blend. But try doing that by importing the technology and you will be painted green (not the Greenback) but by environmentalists who come out of nowhere to swear that applying existing technology will paralyse the blue whale or the Gay eagle or something else fictitious that most westerners like to believe.
The oil industry should be open to more than merely well heeled capialists. It needs the intervention of those who can think and those who are street wise. The industry was made big not by great scientists but by street wise hustlers. It is a commodity and one that can make or break a country.
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