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Venezuelan sanctions unlikely to have a significant impact on U.S. refiners

February 11/2019

MOSCOW (MRC) -- Venezuelan sanctions unlikely to have a significant impact on U.S. refiners, said Hydrocarbonprocessing.

U.S. imports of Venezuelan crude oil have decreased in recent years as production in Venezuela declined. Recently announced U.S. sanctions directed at Venezuelas energy sector and state oil company, Petroleos de Venezuela, S.A. (PDVSA), will essentially eliminate U.S. imports of Venezuelan crude oil as the full effects of the sanctions emerge. However, the U.S. Energy Information Administration (EIA) does not anticipate any significant decrease in U.S. refinery runs as a result of these sanctions.

U.S. imports of Venezuelan crude oil have been falling for several years and refineries have been replacing Venezuelan crude oil with other heavy crude oils.

Moving forward, refineries may also choose to run lighter crude oils because transportation constraints may limit the availability of heavy crude oils. Refiners with significant asphalt and road oils processing unit capacity, for which Venezuelan crude oil is well suited, may have a harder time finding adequate replacements; however, these refineries have also limited imports from Venezuela recently.

On January 23, 2019, the United States officially recognized the President of the Venezuelan National Assembly, Juan Guaido, as the Interim President of Venezuela. On January 25, 2019, the White house issued Executive Order 13857, Taking Additional Steps to Address the National Emergency with Respect to Venezuela, which expanded U.S. sanctions by including PDVSA in sanctions against the Maduro regime. Although there is a wind-down period for purchasing petroleum and petroleum products, payments must be placed into an escrow account that is not accessible by PDVSA. EIA expects this action to have an immediate impact, essentially eliminating U.S. imports from Venezuela as the full effects of the sanctions are felt. The sanctions apply not only to U.S. persons, but also to any transaction involving the U.S. financial system. The Office of Foreign Assets Control at the U.S. Treasury Department indicates that sanctions may be lifted after control of PDVSA is transferred to Interim President Juan Guaido or a subsequent democratically elected government.

The sanctions also prohibit the United States from exporting petroleum products to Venezuela. This prohibition includes diluent, which PDVSA uses to mix with its much heavier crude oils. If PDVSA cannot find another source for diluent in a relatively short period of time, Venezuelas crude oil production is likely to decline.

In the first 11 months of 2018, U.S. Gulf Coast refineries ran crude oil with an average sulfur content of 1.4% and an average API gravity of 32.6 degrees. The average API gravity was 30.0 degrees in 2013 and this change reflects the trend of Gulf Coast refineries running lighter crude oil slates. The lightening of the crude slate is likely the result of increased refinery capacity and availability of lighter crude oils and is not indicative of a decrease in demand for heavy crude oil, which Gulf Coast refineries are generally optimized to run.
Author:Anna Larionova
Tags:petroleum products, petrochemistry, Crude oil.
Category:General News
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