26 Jun 2020
Officials from Venezuelan state oil company Petroleos de Venezuela [PDVSA.UL] have spoken with private contractors about paying for work fixing the country’s refineries with fuel and byproducts, a half dozen people familiar with the talks said.
The possibility of in-kind compensation comes as U.S. sanctions on PDVSA and severe cash-flow problems at the company have complicated its ability to pay third-party contractors, whose help it needs to revamp gasoline output at its 1.3 million barrel-per-day refining network, which is mostly halted.
The outages have contributed to widespread fuel shortages in recent months, which President Nicolas Maduro’s government temporarily alleviated by importing gasoline from ally Iran.
But the shortages have made it hard for farmers to harvest their crops and for doctors to get to hospitals.
“We want to attend to a humanitarian issue, because there are many people suffering,” said one of the people, who spoke on condition of anonymity because the talks were not yet public.
PDVSA has racked up sizable debts to contractors due to failure to make promised payments for work on oilfields and to infrastructure, which has led to the suspension of many projects and left many private contractors struggling with a lack of cash flow. The company has not recently published figures on its total debts to contractors.
The person said the private companies involved planned to discuss the plan with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which enforces sanctions, to try to obtain a license permitting the activities despite the broad sanctions on PDVSA.
The U.S. Treasury Department declined to comment. Neither PDVSA nor Venezuela’s oil ministry responded to requests for comment.
Payment in fuel could pave the way for those private contractors to export the products themselves. That could boost Venezuela’s oil exports by cutting sanctioned PDVSA out of the process, a bet that customers and shippers would be willing to interact with non-sanctioned private companies.
To be sure, that part of the plan likely would not hold up without an OFAC license. The Trump administration has sanctioned several oil and shipping companies for dealing with Venezuela in recent months to ratchet up efforts to oust Maduro, a socialist who has overseen an economic collapse and stands accused of corruption and human rights violations.
It is also weighing sanctions on a Venezuelan shipping magnate who coordinated a gasoline shipment to the country in April, which he described as “humanitarian work.”
By Deisy Buitrago and Luc Cohen, Reuters, 25 June 2020
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