Exclusive: Bank jitters over Venezuela stall oil delivery to U.S. refiner

By Marianna Parraga

MEXICO CITY (Reuters) - A tanker carrying a cargo of about 1 million barrels of Venezuelan heavy crude has been stranded for more than a month off the coast of Louisiana for lack of a bank letter of credit to discharge, three sources have told Reuters.

The cargo's fate adds to state-run oil company PDVSA's precarious financial position. Revenue from the company's oil sales, which have suffered because of low prices and declining production, account for more than 90 percent of the nation's exports.

Major banks are cutting exposure to Venezuela as a result of political upheaval in the South American country. Some have closed accounts linked to officials of the OPEC member who have had sanctions leveled against them by the U.S. government and have refused to provide correspondent bank services or trade in government bonds.

Credit Suisse this month barred operations involving certain Venezuelan bonds and is now requiring that business with President Nicolas Maduro's government and related entities undergo a reputation risk review.

The United States is considering further economic sanctions that would dry up the country's access to Wall Street.

PDVSA and its joint ventures exported 638,325 barrels per day (bpd) to the United States in July, 22 percent less than the same month of 2016, according to Thomson Reuters Trade Flows data.

A GUARANTEE FOR DELIVERY

The tanker Karvounis carrying Venezuelan oil is anchored at South West Pass off the coast of Louisiana, according to Reuters vessel tracking data. PBF Energy Inc, the intended buyer of the cargo, has been trying unsuccessfully to find a bank willing to provide a letter of credit to discharge the oil, according to two trading and shipping sources.

Crude sellers typically request letters of credit from customers that guarantee payment within 30 days after a cargo is delivered. The documents must be issued by a bank and received before the parties agree to discharge.

It was not immediately clear which banks have denied letters of credit or if other U.S. refiners are affected.

PBF Energy spokesman Michael Karlovich would not confirm any details about the cargo, saying: "We treat commercial and logistics arrangements as business confidential information."

PDVSA did not reply to a request for comment.

The tanker loaded in late June at the Caribbean island of St. Eustatius where PDVSA rents storage tanks, and has been waiting for authorization to discharge since early July, according to four trading sources and Reuters data.

CASH BUYERS PDVSA's cash flow has shrunk in recent years due to extended deals to barter its oil for refined products, services and loans. Chinese and Russian entities currently take about 40 percent of all PDVSA's exports as repayment for over $60 billion in loans to Venezuela and the company in the last decade, according to a Reuters analysis of its sales. This has left U.S. refiners among the few remaining cash buyers. Some banks have continued working with Venezuela. In May, Goldman Sachs purchased $2.8 billion of Venezuelan debt bonds at steep discount, a move criticized by the Venezuelan opposition and other banks. But as more banks look to reduce their exposure to Venezuela, the situation is affecting PDVSA's payments to bondholders and its routine oil sales and purchases, according to bank and trade sources.

The Karvounis was chartered by Trafigura [TRAFG.UL], the Reuters data shows. Since last year, the trading firm has been marketing an increasing volume of Venezuelan oil received from companies such as Russia's Rosneft, which lift and then resell PDVSA's barrels to monetize credits extended to Venezuela, according to traders and PDVSA's internal documents. Some barrels get sold on the open market, others are supplied to typical PDVSA's customers including U.S Gulf Coast refiners. PBF and PDVSA have a long-term supply agreement for Venezuelan oil signed in 2015 when PBF bought the 189,00-bpd Chalmette refinery from PDVSA and ExxonMobil Corp.

The U.S. refiner received three cargoes for a total of 1.58 million barrels last month, the lowest figure since February. Other U.S. refineries such as Phillips 66 did not receive any cargo. In early August, PBF's Chalmette refinery received 514,000 barrels of Venezuelan DCO on tanker Ridgebury Sally B, the Reuters data say. A second delivery got stuck on tanker Karvounis.

(Additional reporting by Catherine Ngai and Jarrett Renshaw in New York, Liz Hampton in Houston and Alexandra Ulmer in Caracas; Editing by Gary McWilliams and David Gregorio)

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