Venezuela gets fuel from Russia, Europe - at big markup

Mexico City

VENEZUELA is paying heavy premiums for fuel imports from Russia and Europe, with fewer than a dozen sellers seeing the risk as worth the reward after flows from the United States dried up because of sanctions, trading sources said and data showed.

The South American nation exports crude but its refineries are in poor condition - hence the need to import gasoline and diesel for petrol stations and power plants, as well as naphtha to dilute its heavy oil.

Since the United States imposed fresh sanctions on Venezuela on Jan 28, products supplies have mainly come from Russian state oil major Rosneft, Spain's Repsol, India's Reliance Industries and trading houses Vitol and Trafigura, according to sources and vessel-tracking data.

Russia has been a traditional political backer of Caracas, while India and Spain also have long-standing trade ties. But supplies even from those allies are coming at a cost.

"The prices they are charging us are horrifying," said an executive at Venezuelan state-run oil firm PDVSA who is familiar with recent purchases.

The executive said the heavy premiums were partially due to the fact that single cargoes passed through several hands before reaching Venezuelan ports and also involved complex and expensive ship-to-ship transfers.

A trader involved in one fixture said shipowners were now charging a fee of up to 50 US cents per barrel to Venezuela versus 15-20 US cents before sanctions.

Last year, Venezuela imported most products from the United States with the main providers being PDVSA's own US subsidiary Citgo Petroleum and a US unit of India's Reliance.

Monthly supplies fluctuated but in December alone PDVSA imported almost 300,000 barrels per day (bpd) of fuel as its domestic refineries worked at just below a third of its 1.3-million-bpd capacity, according to PDVSA data.

The new US sanctions, aimed at forcing out Socialist President Nicolas Maduro, bar US oil dollars from flowing to Venezuela.

However, the sanctions were later clarified, allowing US persons to purchase and engage in swaps and non-cash deals for petroleum and petroleum products with PDVSA until April 28 in a move aimed at easing flows and averting a fuel crisis.

Venezuela has, so far, avoided a full-blown fuel crisis. REUTERS