PdV official oil flows slideOREANDA-NEWS. June 20, 2016. Venezuela's crude production decline is accelerating, official data show.

State-owned PdV produced 2.37mn b/d of crude in May, down by 4.8pc from April and 14pc lower than May last year, according to data that PdV reports on a monthly basis to Opec. PdV routinely reports higher production of around 2.7mn b/d to the opposition-controlled national assembly and the local press. But the energy ministry says the numbers reported to Opec are "more accurate". Argus estimates Venezuelan crude production at closer to 2.2mn b/d.

The ministry blames the decline on sharply lower oil prices. "PdV's export prices are recovering slowly, but are still too low to cover operating costs, advance new investments and service its debts," a ministry official tells Argus. PdV's average export price was \\$40.52/bl on 6-10 June, but the year-to-date average to 10 June was \\$30.05/bl, ministry data show. PdV's cash flow troubles have forced the company to reduce essential upstream capital expenditure to reverse natural depletion rates of up to 25pc/yr in some areas, including in Zulia and Anzoategui states, the ministry says.

PdV's cash crisis has delayed payments to oil services contractors such as Schlumberger, Halliburton and Baker Hughes, which have reduced the scope of their operations in Venezuela until PdV starts paying over \\$2bn in combined overdue invoices. PdV owes its contractors and service providers over \\$20bn and is scrambling to develop alternative payment options including issuing bonds, promissory notes and crude supplies in lieu of cash.

PdV has tried with some success to swap Venezuelan crude and products for light crude and naphtha imports needed for blending and to use as diluent to produce its exportable Merey 16 grade, and to transport Orinoco extra-heavy crude from the wellhead to its Jose terminal in Anzoategui.

BP unloaded a 500,000 bl cargo of US light sweet crude at the Bullen Bay terminal that PdV leases on the Caribbean island of Curacao earlier this month, after reaching a crude swaps payment deal with the Venezuelan company, the energy ministry says. PdV hopes that the BP deal establishes a precedent that will enable the delivery of a further 2.1mn bl of light crude loaded on four BP-chartered tankers that have been anchored for almost a month near Bullen Bay, the ministry says. The cargoes form part of a tender to buy over 8mn bl of light crude that PdV awarded to BP and CNPC trading arm ChinaOil in March, with delivery scheduled for the second quarter. Payment issues are thought to have prevented the cargoes from being delivered.

Payment and infrastructure problems led to a backlog of around 83 tankers waiting off PdV terminals in Venezuela and Curacao earlier this month.

Bay watch

Facilities outside Venezuela, such as the Bullen Bay crude and products tank farm and nearby 325,000 b/d b/d Isla refinery, have become increasingly important to PdV's export and crude blending operations, as it struggles to repair terminal installations within the country. An agreement through PdV's US subsidiary Citgo to restart the 280,000 b/d Aruba refinery as an upgrader is aimed at fortifying PdV infrastructure outside Venezuela.

Terminal installations in the country have faltered not only because of a lack of investment but also because PdV is using export-oriented infrastructure for imports. The company completed the installation of three new loading arms at Jose's Petroterminal in early June, but up to five other loading arms are still damaged. Petroterminal was originally designed to load up to 80,000 bl/hr of Venezuelan grades including 32°API Mesa and 16°API Merey.