VENEZUELA'S OIL DISCOUNT

PLATTS - Venezuelan state-owned PDVSA is offering 6.4 million barrels of discounted crude oil to Russian, Chinese and Indian companies, according to a company official and reports seen by S&P Global Platts.

"We are negotiating under spot contracts three shipments of 1.8 million barrels each of Merey 16 crude and 1 million barrels of DCO by May," said the PDVSA official, who spoke to Platts on the condition of anonymity.

According to a PDVSA report, a cargo of 1.8 million barrels of Merey 16 crude that would have been loaded into the Spring Splendor tanker during April 24-26 was rescheduled for May as a spot sale.

The tanker Spring Splendor unloaded a cargo of 975,000 barrels of Nigerian light crude (Agbami) at the Jose terminal, in Anzoategui state, during an April 18-20 window. The Nigerian oil was to be used as an extra heavy crude diluent, the report said.

Crudes are being priced at Dated Brent discounts between $15/b and $17/b, FOB, according to a PDVSA report.

"Prices are outside PDVSA's parameters for the European and Asian markets, but there is a need to decrease inventories at cargo terminals, and to give operational continuity to dispatch terminals and production fields," the report said.

Venezuelan crude production has fallen from 1.23 million b/d in January to 750,250 b/d in April, according to S&P Global Analytics.

However, because US sanctions have hampered PDVSA's crude selling and limited the company's access to crude tankers, crude inventories have grown.

"The inventories are full due to the limitations that traditional customers have to get tankers to lift crude oil from Venezuelan oil ports due to US sanctions," the PDVSA official said.

Crude inventories have also expanded following the shutdown of PDVSA's PetroMonagas heavy crude upgrader because of power failures.

The PDVSA official would not say which companies the 6.4 million barrels of crude were being marketed to.

However, Russia's Rosneft said this week it has a sanctions waiver from the US for deliveries of Venezuelan crude to Rosneft's Indian refinery, as the supplies have been carried out under prepayment contracts.

PDVSA has reduced its debt to Rosneft to $1.8 billion in the first quarter, compared with $2.3 billion at the end of 2018, Rosneft said.

Rosneft could not be reached for further comment.

Rosneft is a partner in multiple projects with PDVSA , including: PetroMonagas; PetroVictoria; Boqueron; PetroMiranda; and offshore projects on the Paria peninsula.

The combined crude production of Venezuela state PDVSA and its foreign partners in the Orinoco Belt has fallen 77% to 169,800 b/d on Tuesday from 764,100 b/d at the start of April due to a lack of tankers to carry exports, according to a company technical report.

The Orinoco production decline, if extended, will pull Venezuelan output lower. One field operator earlier this week said an "optimistic scenario" would put Venezuelan output at 400,000 b/d to 500,000 b/d.

The US sanctions serve as a de facto ban on US imports of Venezuelan crude and an immediate ban on US exports of diluent to Venezuela.

The sanctions require any payment for crude from PDVSA to be deposited into blocked accounts within the US. The funds would ultimately be transferred to a new Venezuelan government, led on an interim basis by Juan Guaido if and when Nicolas Maduro relinquishes power.

On February 1, the US Treasury also gave non-US companies three months to wind down transactions with PDVSA that involve the US financial system, essentially prohibiting sales of PDVSA crude and products in dollars.

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