The opposition party in Venezuela is working up a proposal that would see 200,000 barrels of crude oil per day exported to a trustee, who would then pay creditors who have laid claim on various Venezuelan assets abroad.
Bondholders and creditors are going after Venezuela’s foreign assets in U.S. court for defaulting on payments—and those defaults, which exceed $20 billion, go beyond the value of Venezuela’s foreign assets. Even the value of Citgo, Venezuela’s most prized possession in the United States.
Under this proposal, a newly designated trustee would send 200,000 bpd of crude oil to the United States. The crude oil that would be diverted to the U.S. is currently being sold to China.
Parting with 200,000 bpd of its crude oil that generates much-needed revenues for the troubled country would be painful, but the country is selling that oil to China at about a $20 per barrel discount. If Venezuela ends up selling that oil to the United States instead, it could potentially recoup that discount—although it would be used to pay off debt only, not generating revenue to be used elsewhere. If Venezuela is unable or unwilling to follow through with this plan, it faces a potential breakup of oil refiner Citgo, which the courts could order yet this fall.
The proposal still requires sign-off from the regime of Nicolas Maduro and Washington. In January, Washington signed off on a license that would allow Chevron to ship 134,000 bpd of Venezuelan crude oil to the United States Gulf Coast.
Venezuela currently exports 715,000 bpd of crude oil and refined products based on the most recent data for June—an increase over this same time last year.
By Julianne Geiger for Oilprice.com
