China National Petroleum Corp (CNPC) stopped transporting oil from Venezuela in August 2019, after Washington tightened sanctions on the South American exporter. However, it continued to find its way to China through traders rebranding the fuel as Malaysian, Reuters reported. read more Since November 2020, China Aerospace Science and Industry Corp (CASIC) has been transporting Venezuelan crude oil in three tankers it acquired that year from PetroChina, CNPC’s listed vehicle, the sources said. The oil is stored in a tank farm also taken over by PetroChina, the sources said. Sign up now for FREE unlimited access to Reuters.com Register The three CASIC tankers are loading in Venezuela with their transponders active, allowing third-party tracking, Eikon data showed. The company has received 13 cargoes carrying a total of about 25 million barrels of oil, including two ships due to arrive in China in September, according to loading schedules from Venezuela’s state oil company PDVSA and tanker tracking data from Refinitiv and Vortexa Analytics . The 13 shipments, worth about $1.5 billion at press prices for Venezuela’s flagship Merey crude, were declared as “crude oil” at Chinese customs without specifying the origin, one of the sources said. “These shipments are strictly subject to a government mandate, where CASIC was designated to transport the oil as payment to offset Venezuela’s debt (to China),” the person said. The three sources spoke on condition of anonymity because of the sensitivity of the matter. Without commenting on the debt offset, China’s foreign ministry said on Friday that the two nations were cooperating on “oil for humanitarian goods”. “The cooperation meets Venezuela’s current needs and is also in line with humanitarian principles,” a ministry spokesman said, adding that China opposes unilateral US sanctions and long-term jurisdiction. CASIC’s media departments and the General Administration of Chinese Customs did not respond to requests for comment. A CNPC spokesman declined to comment. A second source said that although part of each shipment pays the debt, other goods, such as vaccines for COVID-19, are also taken out of the gross sales. “All the money from the proceeds stays in China. Venezuela’s foreign ministry is in charge of reconciliation and accountability,” this person said. At about 42,000 barrels per day, these shipments raised Venezuela’s total oil to China to about 420,000 bpd between January and July this year, equivalent to about 3 percent of China’s consumption, according to Emma Li, an analyst of Vortexa, which monitors such flows. China has not officially reported any crude oil imports from Venezuela since October 2019. Venezuela’s debt dates back to 2007, under then-President Hugo Chavez, when the country borrowed more than $50 billion from Beijing under oil loan deals. Reuters was unable to determine how much of Venezuela’s debt remains outstanding. In August 2020, Beijing agreed to extend a grace period for $19 billion of the loans, Reuters reported, but China and Venezuela have not said whether that period has expired.
GREEN CHANNEL
China, the world’s biggest oil buyer, has in recent years benefited from cheaper oil supplies from Iran and Venezuela and in recent months has increased imports from Russia amid strained relations with Washington. The country manages crude oil imports under a rigid quota system for specialized refineries. CASIC shipments are an exception, with no quota, the first source said. “They are entering China under a special green channel,” the person said. PDVSA and Venezuela’s oil and foreign ministries did not respond to requests for comment. The US Treasury Department, which imposes the sanctions, declined to comment. CASIC, which began in 1956 as a defense research arm that developed China’s first rocket, has over the decades expanded into a defense conglomerate specializing in space technology. He was chosen for the oil job because he is politically powerful and has limited global financial exposure, making him less vulnerable to sanctions, the first source said. The company since 2015 has been working with state-owned oil giants including CNPC and Sinopec in oil equipment manufacturing, digital technology and overseas projects, according to company websites.
TANKER TRANSPORT, STORAGE
Venezuela’s CASIC oil shipments are carried by three very large crude carriers – Xingye, Yongle and Thousand Sunny – according to PDVSA loading schedules and vessel tracking by Vortexa and Refinitiv. CASIC took over the vessels from PetroChina in 2020, shortly after PetroChina took control of them following a legal dispute with PDVSA over assets involved in a joint venture bankruptcy, two sources told Reuters. PetroChina told Reuters in 2020 that it had moved the vessels, but declined to say to whom. PetroChina also transferred to CASIC a tank farm based in the eastern coastal city of Ningbo, where shipments are delivered, the sources added. All Venezuelan oil cargoes received by CASIC were initially received at the Port of Jose by Cirrostrati Technology Co Ltd, a company with no history in the oil trade, which acted as an intermediary only for these cargoes, according to PDVSA’s plans. Cirrostrati could not be reached for comment. Reuters was unable to find the company’s registration or incorporation information, nor was it able to independently identify any other links between Cirrostrati and CASIC. Oil shipped by CASIC is mostly consumed by China’s independent refiners, which increasingly rely on cheaper crude from Iran and Venezuela, and more recently Russia, to keep operations going. An independent refiner said it was offered the oil at $8 a barrel below benchmark Brent crude from the warehouse, at a discount of more than $30 for crude of similar quality traded as a Malaysian export. “It’s more costly, but it’s good that the government is now taking over these Venezuelan supplies, which saves us a lot of logistics headaches and sanctions-related risks,” a refinery executive said. Sign up now for FREE unlimited access to Reuters.com Register Reporting by Chen Aizhu in Singapore and Marianna Parraga in Houston. Additional reporting by Dafni Psaledakis in Washington, Vivian Sequera in Caracas, Eduardo Baptista in Beijing and The Beijing Newsroom. Edited by Gerry Doyle and William Mallard Our Standards: The Thomson Reuters Trust Principles. Marianna Parraga Thomson Reuters He focused on energy-related sanctions, corruption and money laundering with 20 years of experience covering the Latin American oil and gas industries. Born in Venezuela and based in Houston, she is the author of “Oro Rojo,” about Venezuela’s troubled state-owned company PDVSA, and a mom to three boys.
