Venezuela’s state oil firm PDVSA is tightening terms for buyers after a month-long suspension to most exports of fuel and crude, asking for prepayment ahead of loadings in either cash, goods, or services, according to company documents.
PDVSA’s new Chief Executive Pedro Tellechea introduced the move this month. It reinforces measures put in place in 2022 after several buyers missed payments for oil, which provide most of the South American country’s income.
After taking control, Tellechea launched a comprehensive review of supply contracts, according to a written order to PDVSA seen by Reuters.
His order froze loadings, even pushed some vessels away that had starter receiving oil, until the review was concluded and sale contracts could be revised or ratified, according to internal documents and three people with knowledge of the matter.
As of Jan. 27, twenty-eight vessels including 21 supertankers were waiting near PDVSA’s ports to load some 45 million barrels of fuel and crude for exports. Another four ships had loaded but were waiting for approvals to depart, according to vessel monitoring service TankerTrackers.com.
The new terms reduce a wide variety of contract modalities to a few demanding prepayments of cargoes fully in cash or allowing payment via goods and services to Venezuela, but they must be received before Venezuela will release the oil, the documents showed.
PDVSA failed to respond to a request for comment.
‘SOLVE’ ECONOMIC WOES
PDVSA explained in a contract seen by Reuters that cash prepayment places the firm “in a favorable business position because it would secure income for the country that is essential to solving its economic situation.”
The new models set a time limit of fewer than 30 days for completing bank transfers or paying off outstanding debt balances.
In cases of swaps where the related oil sale surpasses the value of the goods or services, Venezuela must receive any remaining balance in kind before the state will assign the next cargo, according to one of the documents.
Even long-term buyers must comply with the new rules that demand payment in full by cash ahead of each oil delivery.So far this month, swap contracts with Iran’s state firm Naftiran Intertrade Co (NICO) and Cuba’s Cubametales were among the few in force.
A contract with Chevron Corp (CVX.N) for paying off debt was unaffected. PDVSA has proceeded with loading Chevron-chartered vessels and releasing imports from the U.S. firm.
An identical contract to pay off a debt to China with oil has continued, although the customer has experienced more than 30 days of loading delays, according to shipping documents and Refinitiv Eikon data.
Since the suspension was imposed early this month, only one of PDVSA’s list of new clients and intermediaries, Hangzhou Energy, has been authorized to continue loading following a 12-month contract extension negotiated this week, according to the documents and one of the sources.
Other contracts are in the final review and should be approved soon, another source said.
UNDER THE RADAR
Before U.S. sanctions, PDVSA used to accept letters of credit as guarantees if buyers were approved to become established customers, and payments were concluded in 90 days. Audit mechanisms were suspended nearly two years ago as the sanctions booted out traditional clients who were replaced by small known intermediaries with no track record of oil sales.
Some of those new intermediaries have faced court cases under allegations of embezzling and corruption.
Following a rise in the number of oil cargo departures without proper compensation to PDVSA, the firm last year asked to be prepaid at least partially in cash or goods. But the measure had not entirely ended the furtive cargoes.
Buy Crypto NowNow, most of the proposed contracts suggest a form of swap, so PDVSA pays with oil in return for the government receiving medicine, food, or services, including telecommunications equipment and home reconstruction.
The suspension has caught even PDVSA employees by surprise.
“While contracts remain suspended, we have been told to register all exports in Excel sheets,” instead of using PDVSA’s contract administration system, a company employee said.