Venezuela’s Importing the Most Fuel Since U.S. Sanctions Started

(Bloomberg) -- Venezuela is importing fuel at a rate not seen since the U.S. imposed crippling sanctions on the country and cut off its main supply of foreign gasoline.

Fuel imports, which are key to President Nicolas Maduro’s grip on power in Venezuela, more than doubled in July from the previous month, according to shipping reports and ship-tracking data compiled by Bloomberg. Maintaining that supply of heavily subsidized gasoline is central to keeping a lid on discontent in the nation, already suffering from inflation, food shortages and a widespread humanitarian crisis.

Gasoline supplies are especially important as state-owned oil refiner Petroleos de Venezuela SA, or PDVSA, is expected to operate at just 15% of its capacity through 2020, according to Nicolas Daher, a London-based analyst at Facts Global Energy. “So fuel imports are and will continue to be vital for meeting domestic fuel demand and avoiding any further increase in social discontent.”

The last time a Venezuelan leader attempted to phase out fuel subsidies, a wave of riots broke out nationwide leaving at least 3,000 dead. Despite escalating U.S. sanctions, the Venezuelan government has so far kept gasoline prices at bay. Venezuelans can fill a tank with less than $1.

In July, imports soared to 196,000 barrels a day, with Greece as the main supplier. About 33% of that volume loaded in Agioi Theodoroi, the port that serves refineries owned by Motor Oil (Hellas) Corinth Refineries S.A, Greece’s largest exporter of oil products. The Athens-based company has an agreement to supply oil products to a Rosneft Oil Co PJSC subsidiary, Petrocas Energy Ltd, through 2022. Rosneft is a long-time ally of PDVSA, having loaned $6.5 billion to be paid back in oil.

Rosneft’s press-office did not respond to Bloomberg messages seeking a comment on oil product supplies to Venezuela.

While Venezuela used to import all of its gasoline from U.S. Gulf refiners, that flow came to a halt after sanctions were announced. Since then, PDVSA has been importing mostly from Greece and Russia, but also Turkey, Nigeria and the United Arab Emirates. The South American nation imports gasoline, diesel and MTBE, a gasoline octane booster. It also imported cargoes of vacuum gas oil, a feedstock used by refineries to produce gasoline.

Most of the gasoline is supplied in barter deals, where companies including Rosneft provide gasoline and diesel in exchange for crude oil. Rosneft got 58% of all crude cargoes exported by the country in July, and was also responsible for most of the fuel cargoes supplied to the country, according to data compiled by Bloomberg. PDVSA also got diesel cargoes from Repsol (MC:REP) SA in July.

“Due to the U.S. sanctions, barter deals will continue being vital for both Venezuela’s fuel imports and crude exports,” Daher said.

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