Image: Reuters Berita 24 English - According to three sources and tanker tracking data, China has told a defense-focused state firm to ship ...
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| Image: Reuters |
Berita 24 English - According to three sources and tanker tracking data, China has told a defense-focused state firm to ship millions of barrels of Venezuelan oil despite U.S. sanctions. This is part of a deal to pay off Caracas' billions of dollars of debt to Beijing.
After Washington tightened sanctions on the South American exporter, China National Petroleum Corp (CNPC) stopped carrying oil from Venezuela in August 2019. Reuters said that the fuel kept getting to China through traders who changed the name of the fuel to "Malaysian."
Sources say that since November 2020, three tankers owned by China Aerospace Science and Industry Corp. (CASIC) that were bought from PetroChina, CNPC's listed vehicle, have been carrying crude oil from Venezuela. Sources say that the oil is stored on a tank farm that it also took over from PetroChina.
Eikon data showed that the three CASIC tankers load in Venezuela with their transponders turned on, which lets third parties track them.
According to the loading schedules of Venezuelan state oil company PDVSA and tanker tracking data from Refinitiv and Vortexa Analytics, the company has so far bought 13 cargoes with a total of about 25 million barrels of oil. Two of these vessels are due to arrive in China in September.
One of the sources said that the 13 shipments, which were worth about $1.5 billion based on the price formula for Venezuela's top-grade Merey crude, were declared "crude oil" at Chinese customs without mentioning where they came from.
"These shipments are strictly government orders, and CASIC was given the job of moving the oil to pay off Venezuela's debt to China," the person said.
All three sources spoke on the condition that they could not be named because the matter was so sensitive.
The media departments at CASIC, China's Ministry of Foreign Affairs, and the General Administration of Chinese Customs did not respond to requests for comment.
A CNPC representative declined to comment.
A second source said that part of each shipment goes toward paying down debt, but that other goods, like COVID-19 vaccines, are also taken out of the sales of crude oil.
"All of the money made stays in China. The Ministry of Foreign Affairs in Venezuela is in charge of making peace and taking responsibility "this person said.
Between January and July of this year, these shipments brought the total amount of Venezuelan oil going to China to about 420,000 bpd, which is equal to about 3% of China's consumption, according to Emma Li, an analyst with Vortexa who keeps track of such flows.
Officially, China has not bought crude oil from Venezuela since October 2019.
Venezuela's debt goes back to 2007, when the country borrowed more than $50 billion from China in exchange for oil. This was during the presidency of Hugo Chavez.
Reuters was not able to figure out how much of Venezuela's debt is still due. Reuters said that Beijing agreed in August 2020 to extend a grace period for $19 billion of the loans, but neither China nor Venezuela have said whether this period is over or not.
GREEN CHANNEL
China is the biggest buyer of oil in the world. Over the past few years, cheaper oil from Iran and Venezuela has helped China save money, and as relations with the U.S. have gotten worse, China has been buying more oil from Russia.
A strict quota system for qualified refiners controls how much crude oil can be brought into the country. The CASIC shipments are an exception, and there is no limit on them, said the first source.
"They use a special green channel to get into China," the person said.
When asked for comments, PDVSA and Venezuela's oil and foreign affairs ministries did not respond.
The U.S. Treasury Department, which is in charge of enforcing sanctions, didn't want to say anything.
In 1956, CASIC began as a defence research arm that made China's first missile. Over the years, it has grown into a defence conglomerate that focuses on space technology.
The first source said that it got the oil job because it is politically strong and has limited financial ties to the rest of the world. This makes it less likely to be hit by sanctions.
According to company websites, since 2015, the company has worked with state oil giants like CNPC and Sinopec on making oil equipment, digital technology, and projects overseas.
TRANSFER AND STORAGE OF TANKS
Three Very Large Crude Carriers, called Xingye, Yongle, and Thousand Sunny, bring Venezuelan oil to CASIC. This is based on PDVSA's loading schedules and ship tracking by Vortexa and Refinitiv.
Two sources told Reuters that CASIC took over the ships from PetroChina in 2020. This happened soon after PetroChina took control of the ships after a legal dispute with PDVSA over assets in a bankrupt joint venture. In 2020, PetroChina told Reuters that it had given the ships to someone else, but it wouldn't say who.
The sources also said that PetroChina gave CASIC a tank farm in the eastern coastal city of Ningbo, where the shipments are sent.
All of the Venezuelan oil cargoes that CASIC got were picked up at the Jose port by Cirrostrati Technology Co LTD, a company that had never traded oil before and only did so for these cargoes, according to PDVSA's schedules.
Cirrostrati could not be reached to give his opinion. Reuters could not find the company's registration or incorporation information or find any other links between Cirrostrati and CASIC on its own.
Most of the oil shipped by CASIC is used by China's independent refiners, which rely more and more on cheaper crude from Iran, Venezuela, and, more recently, Russia to stay in business.
One independent refiner said that the oil was offered to them at $8 per barrel less than benchmark Brent crude ex-storage basis, which is more than $30 less than the discount for similar-quality crude that was sold as a Malaysian export.
"It's more expensive, but it's good that the government is now in charge of these Venezuelan supplies. This saves us a lot of trouble with logistics and risks related to sanctions," an executive at the refiner said.
