PdV-Ancap oil-for-food deals founder

OREANDA-NEWS. October 29, 2015. Venezuelan state-owned oil firm PdV likely will not renew a decade-old preferential oil supply agreement with Uruguay's state-owned oil firm Ancap because PdV can't guarantee fulfillment, the energy ministry tells Argus.

"PdV's exportable crude and product supply is very tight and the oil export revenue must be maximized because oil's price is too low," the ministry said.

The supply contract has been in effect since 2005. PdV halted deliveries of about 10,000 b/d to Ancap in May 2015 when the annual supply contract between the companies expired, the ministry said.

At the time, Ancap and PdV were negotiating a debt restructuring agreement to pay in full the Uruguayan oil company's \\$400mn oil-related debt to Venezuela in a one-off transaction that included a hefty haircut for PdV.

PdV and Ancap signed an agreement in July 2015 whereby Ancap made a one-time \\$300mn cash payment to PdV, which agreed to discount \\$100mn from the total outstanding.

That agreement also committed PdV to creating a \\$300mn escrow account at Uruguay's Bandes development bank to finance the export to Venezuela of 265,000 metric tons of food, and pay a past-due \\$38mn debt Caracas owes two Uruguayan food exporters. But PdV to date has not set up the escrow account at Bandes, Uruguay's embassy in Caracas said.

The delay threatens to kill last July's 265,000 mt food export deal with Uruguay, and sink a \\$1bn oil-for-food deal slated for 2016, the embassy said.

Ancap meanwhile has started sourcing its crude imports with new suppliers in Brazil and Africa, the embassy added.

Venezuela's energy ministry declined to explain why PdV has not funded the Bandes escrow account. PdV also declined to comment.

PdV's 2014 annual report shows exports to Uruguay of 10,100 b/d last year and 16,800 b/d in 2013.

Under the annual supply agreement, Ancap can finance half of its oil purchases from PdV for up to 15 years at 2pc annual interest plus a front-end grace period of two years.

The supply agreement also allows Ancap to pay for its Venezuelan oil with agricultural products.