October 21, 2019 / 4:57 PM / a month ago

Refiner Nynas to suspend imports of Venezuelan oil due to sanctions

(Reuters) - European refiner Nynas AB will suspend imports of Venezuelan crude following changes to a license allowing it to operate under U.S. sanctions, the company said on Monday, adding it was looking to shift to alternative sources of oil.

Nynas, owned by Venezuela’s state-run PDVSA and Finland’s Neste Oil (NESTE.HE), operates specialty refineries in Sweden, Germany and England mostly for asphalt production.

In January, the refiner received a license from the United States allowing it to operate under sanctions imposed on its parent company, PDVSA. But the Treasury Department last week introduced changes to the permit effective immediately.

The modified version of license GL 13D, which allows Nynas to operate through April 2020, said it does not authorize “any transactions or dealings related to the purchase or acquisition of Venezuelan-origin petroleum or petroleum products, directly or indirectly, by Nynas or any of its subsidiaries.”

“The GL 13D allows for the continued sale of products of Venezuelan origin that are already in inventory. However, it limits new sourcing by Nynas of Venezuelan-origin petroleum or petroleum products,” the company said in an emailed statement.

Nynas also said it is processing other crude grades, including oil from the North Sea and Australia, and it has begun a “flexibility program” at its refineries to completely shift to alternative crude oil and raw materials.

PDVSA did not reply to requests for comment.

Nynas mostly buys and processes naphthenic crudes, which are good for asphalt production and also are difficult to source. Venezuela’s Western crude grades had traditionally been Nynas’ primary source of oil.

The refining firm said the license renewal provides “good evidence that the U.S. authorities have listened to the Nynas message regarding supplier and customer concerns”.

INVENTORY BUILD

The suspension of the supply contract between PDVSA and Nynas could constrain the Venezuelan state company’s dwindling cash flow while adding to mounting inventories of unsold oil that have forced it to cut output in recent months.

Nynas is one of only two buyers of PDVSA’s Western crudes left after sanctions and among the few cash-paying customers to the state-run oil company.

“This might be as harmful for us as for Europe’s asphalt market,” a PDVSA executive said.

PDVSA’s oil production declined again in September amid power outages, equipment theft and a fast accumulation of crude stocks as sales shrank further.

“This could result in the shut-in of approximately 50,000 barrels per day from the Petrozamora joint venture,” said David Voght from consultancy IPD LatinAmerica, referring to the project that produces the crude grades Nynas typically buys.

The U.S. Treasury Department on Monday granted a three-month renewal to Chevron Corp’s license to operate in Venezuela, along with U.S. oil service firms Schlumberger, Halliburton, Baker Hughes and Weatherford International.

Chevron is scheduled to take a cargo of Venezuelan crude this month, according to a PDVSA document seen by Reuters last week.

Reporting by Marianna Parraga; Editing by David Gaffen, David Gregorio and Cynthia Osterman

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