The U.S. Treasury Department last week announced new sanctions on Petróleos de Venezuela, S.A. (PDVSA), the national oil company of Venezuela, that effectively halts imports of Venezuelan crude oil into the U.S. Given that the Venezuelan crude imported to the U.S. is of the heavy sour variety, which is not produced in large amounts in the U.S. (except for California), certain refineries along the Gulf Coast are left scrambling to find alternative sources of feedstock for their facilities. Today, we evaluate historical crude oil imports from Venezuela, the refineries that are most heavily impacted, and the potential effects of the sanctions on U.S. refiners.
Refineries in Petroleum Administration for Defense District (PADD) 3, which includes the Gulf Coast, processed an average of 9 MMb/d of crude oil in 2018, and of that total, approximately 1.6 MMb/d was of the heavy sour variety. Of the heavy sour portion, ~420 Mb/d came from Venezuela. Some may wonder how a country that supplies less than 5% of PADD 3’s crude slate could cause industry headaches; today, we’ll explain why.
We start our analysis with a look at the volumes and qualities of crude oil that U.S. refineries have been receiving from Venezuela in recent years. Between 2007 and 2018 (through October), the U.S. reduced the quantity of crude oil imported from Venezuela from 1.4 MMb/d (far-left bars in both Figure 1 charts) down to ~500 Mb/d last year. Some of this reduction is due to the 2012 shutdown of the Hovensa refinery in the U.S. Virgin Islands (light blue bar segments in the left chart), as well as the shutdown of some asphalt plants in PADDs 1 (East Coast) and 3. Other reductions have coincided with increasing quantities of Canadian crudes being available and reduced Venezuelan production. The remaining Venezuelan imports have been destined for the Gulf Coast (left chart, green bars), where the refining infrastructure is highly complex and has the capability to convert heavy sour crude (the predominant Venezuelan grade now being imported; see the right chart, dark brown bar segments) into valuable refined products.
To access the remainder of El Diablo Suelto - How Will the Ban on Venezuelan Crude Affect U.S. Refiners? you must be logged as a RBN Backstage Pass™ subscriber.
Full access to the RBN Energy blog archive which includes any posting more than 5 days old is available only to RBN Backstage Pass™ subscribers. In addition to blog archive access, RBN Backstage Pass™ resources include Drill-Down Reports, Spotlight Reports, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. If you have already purchased a subscription, be sure you are logged in For additional help or information, contact us at firstname.lastname@example.org or 888-613-8874.