Venezuela blackout halts oil exports, refinery operations
12 March 2019
Venezuela’s state-run oil firm PDVSA has been unable to resume crude exports from its primary port since last week’s country-wide power outage, essentially crippling the OPEC nation’s principal industry. The power outage also affected the Puerto la Cruz refinery in Anzoategui, run by state-owned oil company PDVSA, which was already operating at minimum levels. Authorities have given few indications how long it might take to restore power.
The government of President Nicolas Maduro, the subject of international sanctions, claimed the blackout was a US-backed act of sabotage on the country’s principal hydroelectric dam, but outside observers said it was more likely the result of more than a decade of corruption and mismanagement.
PDVSA has launched a contingency plan to restore power to the Jose port, according to one source. The state of Anzoategui, where the port is located, has had only intermittent electricity since March 8, the source added. The port has its own generator, but depends on the grid for 65% of its power, a PDVSA source said. The generator is not currently working and efforts are underway to restart it in order to maintain a minimum level of operation.
Venezuela’s oil production has fallen to an almost seven-decade low due to mismanagement, a lack of investment and financial sanctions imposed by the US government. Its declining oil exports have led the nation into a severe economic crisis and fuelled an exodus of about 3 million residents.
Reuters said the current outage has been much more widespread and prolonged than those in the past affecting PDVSA operations across the country. The blackout has also hit domestic fuel supply.
Even as PDVSA struggles to restart exports, it is having trouble delivering shipments it has already dispatched from its ports due to US sanctions imposed on the company in January in an effort to reduce Venezuela’s government’s cash flow and drive Maduro from power.
US buyers of Venezuelan oil are trying to return millions of barrels of crude they need but cannot accept due to the sanctions, leaving the barrels in limbo as demurrage fees accumulate, according to an internal PDVSA document seen by Reuters.
This comes at a time when the World Bank has ruled Venezuela must pay ConocoPhillips more than $8 billion (£6.15 billion) to compensate for the 2007 expropriation of oil assets by the country’s late socialist leader Hugo Chavez.
The oil company had sought up to $30 billion for the takeover of three oil projects more than 10 years ago, according to a World Bank report. The tribunal, known as ICSID, found the takeover unlawful in 2013 and two years ago rejected the OPEC-member country’s request for reconsideration.
While Conoco prevailed in its main claim of damages arising from the expropriation of its assets, the award represents about 40% of its claim. ICSID ruled against the company’s request for the loss of future tax credits, which was valued at some $10 billion, the ICSID said.
The tribunal’s decision brings Conoco’s total awards under two different Venezuela arbitration cases to $10.7 billion. Under World Bank rules either party to a decision can request to annul the award, which would trigger a stay of any enforcement.
Last year, Conoco received a $2.04 billion award from the International Chamber of Commerce (ICC) involving broken contracts on some of the same assets. PDVSA agreed to pay the award and delivered $400 million after Conoco began to attach assets in the Caribbean to enforce the ruling.
Other oil and mining firms have also been awarded multi-billion awards by ICSID against Venezuela. The nation’s nationalisation wave, led by Chavez as part of his Socialist project, led to more than 20 international arbitration claims, which remain mostly unpaid.
Contact Details and Archive...