Under US sanctions, Iran and Venezuela strike oil export deal — Reuters

Under US sanctions, Iran and Venezuela strike oil export deal — Reuters
A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Arabian Gulf. (Reuters)
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Updated 25 September 2021

Under US sanctions, Iran and Venezuela strike oil export deal — Reuters

Under US sanctions, Iran and Venezuela strike oil export deal — Reuters
  • Venezuela has agreed to swap its heavy oil for Iranian condensate that it can use to improve the quality of its tar-like crude

CARACAS/HOUSTON/WASHINGTON: Venezuela has agreed to a key contract to swap its heavy oil for Iranian condensate that it can use to improve the quality of its tar-like crude, with the first cargoes due this week, five people close to the deal said.
As the South American country seeks to boost its flagging oil exports in the face of US sanctions, according to the sources, the deal between state-run firms Petroleos de Venezuela (PDVSA) and National Iranian Oil Company (NIOC) deepens the cooperation between two of Washington’s foes.
One of the people said the swap agreement is planned to last for six months in its first phase, but could be extended. Reuters could not immediately determine other details of the mwpact.
The oil ministries of Venezuela and Iran, and state-run PDVSA and NIOC did not reply to requests for comment.
The deal could be a breach of US sanctions on both nations, according to a Treasury Department email to Reuters which cited US government orders that establish the punitive measures.
US sanctions programs not only forbid Americans from doing business with the oil sectors of Iran and Venezuela, but also threaten to impose “secondary sanctions” against any non-US person or entity that carries out transactions with either countries’ oil companies.
Secondary sanctions can carry a range of penalties against those targeted, including cutting off access to the US financial system, fines or the freezing of US assets.
Any “transactions with NIOC by non-US persons are generally subject to secondary sanctions,” the Treasury Department said in response to a question about the deal. It also said it “retains authority to impose sanctions on any person that is determined to operate in the oil sector of the Venezuelan economy,” but did not specifically address whether the current deal is a sanctions breach.
US sanctions are often applied at the discretion of the administration in power. Former US President Donald Trump’s government seized Iranian fuel cargoes https://www.reuters.com/article/us-usa-iran-cargo-idUSKCN25A2AH at sea bound for Venezuela for alleged sanction busting last year, but his successor Joe Biden has made no similar moves.
In Washington, a source familiar with the matter said the swap arrangement between Venezuela and Iran has been on the radar screens of US government officials as a likely sanctions violation in recent months and they want to see how far it will go in practical terms.
US officials are concerned, the source said, that Iranian diluent shipments could help provide President Nicolas Maduro with more of a financial lifeline as he negotiates with the Venezuelan opposition toward elections.
Sanctions on both nations have crimped their oil sales in recent years, spurring NIOC to support Venezuela — including through shipping services and fuel swaps — in allocating exports to Asia.
In a meeting at the UN General Assembly in New York on Wednesday, the foreign ministers of Venezuela and Iran publicly stated their commitment to stronger bilateral trade, despite US attempts to block it.
Trump’s tightening of sanctions contributed last year to a 38 percent fall in Venezuela’s oil exports — the backbone of its economy — to their lowest level in 77 years and curtailed sources of fuel imports, worsening gasoline shortages in the nation of some 30 million people.
A US Treasury spokesperson said the department was “concerned” about reports of oil deals between Venezuela and Iran, but had not verified details.
“We will continue to enforce both our Iran and Venezuela-related sanctions,” the spokesperson said. Treasury “has demonstrated its willingness” to blacklist entities who support Iranian attempts to evade US sanctions and who “further enable their destabilizing behavior around the world,” the official added.
The swap contract would provide PDVSA with a steady supply of condensate, which it needs to dilute output of extra heavy oil from the Orinoco Belt, its largest producing region, the people said. The bituminous crude requires mixing before it can be transported and exported.
In return, Iran will receive shipments of Venezuelan heavy oil that it can market in Asia, said the people, who declined to be identified as they were not authorized to speak publicly.

CARGOES THIS WEEK
PDVSA has boosted oil swaps to minimize cash payments since the US Treasury Department in 2019 blocked the company from using US dollars. Washington has also sanctioned foreign companies for receiving or shipping Venezuelan oil.
Since last year, PDVSA has imported two cargoes of Iranian condensate in one-off swap deals to meet specific needs for diluents, and it has also exchanged Venezuelan jet fuel for Iranian gasoline.
The new contract would help PDVSA secure a source of diluents, stabilizing exports of the Orinoco’s crude blends, while allowing its own lighter oil to be refined in Venezuela to produce badly needed motor fuel, three of the people said.
The first 1.9 million barrel cargo of Venezuela’s Merey heavy crude under the new swap set sail earlier this week from PDVSA’s Jose port on the very large crude carrier (VLCC) Felicity, owned and operated by National Iranian Tanker Co. (NITC), according to the three people and monitoring service TankerTrackers.com.
NITC, a unit of NIOC, did not reply to a request for comment.
The vessel was not included in PDVSA’s monthly port schedules for September, which lists planned imports and exports. However, TankerTrackers.com identified it while at Jose this month.
The Venezuelan crude shipment is a partial payment for a cargo of 2 million barrels of Iranian condensate that arrived in Venezuela on Thursday, according to the three sources and one of PDVSA’s port schedules.

LITTLE ENFORCEMENT
Last year, the previous Trump administration seized over 1 million barrels of Iranian fuel bound for Venezuela and blacklisted five tanker captains, as part of a “maximum pressure” strategy, but the United States has not interdicted recent Iranian supplies to Venezuela.
The US State Department declined to comment on the deal. A Treasury spokesperson did not respond to a Reuters question on how concerned the government might be that Iran-Venezuela deals would allow PDVSA to step up exports.
US government officials have insisted they do not plan to ease sanctions on Venezuela unless Maduro takes definitive steps toward free and fair elections.
Trump’s curbs on established companies doing business with PDVSA prompted the socialist-ruled nation to turn to swaps with Iran and other countries, while trading with a series of little-known customers.
PDVSA’s new customers and swaps have allowed it to keep exports stable around 650,000 barrels per day (bpd) this year, after they zigzagged in 2020.
However, a worsening shortage of diluents has recently limited oil exports, placing the Orinoco Belt production in an “emergency,” according to PDVSA documents from August and September related to its output status that were reviewed by Reuters.
PDVSA plans to mix the Iranian condensate with extra heavy oil to produce diluted crude oil, a grade demanded by Asian refiners that it has struggled to export since late 2019 when suppliers halted diluent shipments due to sanctions, the three sources said.


After Alitalia’s demise, ITA airline launches with new look

After Alitalia’s demise, ITA airline launches with new look
Updated 15 October 2021

After Alitalia’s demise, ITA airline launches with new look

After Alitalia’s demise, ITA airline launches with new look
  • ITA, or Italy Air Transport, officially launched after bankrupt flag carrier Alitalia landed its final flights Thursday night
  • Protests and strikes accompanied the runup to Alitalia's formal demise because the much smaller ITA Airways

ROME: Italy’s new national airline, ITA Airways, flew its inaugural flights Friday and unveiled its brand and logo, recycling the red, white and green of its Alitalia origins. It tries to chart a new future while competing with low-cost airlines.
ITA, or Italy Air Transport, officially launched after bankrupt flag carrier Alitalia landed its final flights Thursday night, ending a 74-year business history that a series of financial crises had marred in recent years.
Protests and strikes accompanied the run-up to Alitalia’s formal demise because the much smaller ITA Airways is only hiring around a quarter of Alitalia’s more than 10,000 employees. Negotiations with unions are ongoing.
ITA paid 90 million euros (over $104 million) for the rights to the Alitalia brand and website, but the new airline is called ITA Airways and it has its own website and a new frequent flier program, called “Volare” (“Fly”).
“Discontinuity doesn’t mean denying the past, but evolving to keep up with the times,” ITA President Alfredo Altavilla said in a statement.
During a conference launching the airline, Altavilla insisted that the greatly reduced size of ITA — its slimmer fleet, workforce and destinations — make it a viable carrier that can compete with low-cost airlines while offering better service, connections and value.
“ITA Airways is being born right-sized, in the optimal dimensions both in terms of the size of its fleet and its destinations,” he said. “We don’t carry with us the negative inheritance of being too big that conflict with the economic reality.”
He bristled when asked about reported predictions by low-cost carriers of ITA Airways’ failure.
“They might be very, absolutely right that this is gonna be difficult for us, but I am really curious to see one day their PnL (Profits and Loss) and their balance sheet without all the subsidies that they are getting from the local institutions and the small airports here in Italy,” Altavilla said.
“I want a level playing field,” he added.
The first ITA flight was the 6:20 a.m. from Milan’s Linate airport to the Italian city of Bari, on the Adriatic Sea. In all, ITA is flying to 44 destinations and aims to increase that number to 74 in four years.
Among its routes, the company plans to operate flights to New York from Milan and Rome, and to Tokyo, Boston and Miami from Rome. European destinations from Rome and Milan’s Linate airport will also include Paris, London, Amsterdam, Brussels, Geneva and Frankfurt, Germany. Routes to South America and Los Angeles are planned.
ITA planes will be royal blue with Alitalia’s trademark “tricolore” on the tail, reflecting the red, white and green of the Italian flag. The Italian national sports team colors are blue, and company officials said Friday that the color scheme chosen for the new aircraft aims to make ITA “azzurri,” — the team nickname — too.
For now, the new blue Airbus aircraft exists only in advertisements, with Alitalia’s old white fleet actually in the skies.
Officials were coy about possible partnerships with other airlines. Previously, Alitalia was a member of the SkyTeam alliance, which included Delta, Air France and KLM, among other airlines.
ITA has 52 planes that it says will grow to 105 in the same period and is pointing to next-generation aircraft that use sustainable, alternative fuel sources.
The company launched with 2,800 employees — 70 percent of them from Alitalia — and said it expects to increase the size of its workforce to 5,750 by 2025.


Brent tops $85 as Saudi oil minister vows to stick to output plan

Brent tops $85 as Saudi oil minister vows to stick to output plan
Updated 15 October 2021

Brent tops $85 as Saudi oil minister vows to stick to output plan

Brent tops $85 as Saudi oil minister vows to stick to output plan
  • Oil could reach $100 a barrel as demand rises, Russian President Vladimir Putin said

RIYADH: Brent crude passed $85 a barrel and WTI was headed for an eighth consecutive weekly advance as Saudi Oil Minister Abdulaziz bin Salman Al Saud insisted OPEC+ will stick to its plan to increase output at a steady pace in the coming months.

Brent gained 1 percent to $84.82 a barrel at 3:33 p.m. Riyadh time, headed for a 3 percent weekly gain. They earlier touched $85.10, a three-year high. West Texas Intermediate (WTI) also gained 1 percent, to $82.12, 3.5 percent higher on the week.

OPEC+, the alliance of OPEC and non-OPEC producers led by Saudi Arabia and Russia, would be adding 400,000 barrels per day (bpd) in November, and then again in the following months, the Kingdom’s energy minister told delegates at Russian Energy Week on Thursday.

While the market is tight today, it is set to be return to balance by the end of the year and be in surplus during 2022, according to OPEC forecasts.

The benefits of the approach OPEC+ has taken can be seen in the steady increase in the price of oil this year compared with the wild price swings in other markets, he said.

“What we see in the oil market today is an incremental (price) increase of 29 percent, vis-à-vis 500 percent increases in (natural) gas prices, 300 percent increases in coal prices, 200 percent increases in NGLs (natural gas liquids) ...,” he said. OPEC+ has done a “remarkable” job acting as “so-called regulator of the oil market.”

Such has been the success of OPEC+, other commodity markets should adopt similar arrangements, he said.

“Gas markets, coal markets, and other energy sources need to be regulated, people need to copy and paste what OPEC has done and what OPEC+ has achieved,” the Saudi minister added.

Saudi Arabia has proposed that Russia consider the possibility of cooperating in the natural gas market, Russian Deputy Prime Minister Alexander Novak said on Thursday, according to TASS news agency.

Oil prices were also supported by a bullish demand forecast from the International Energy Agency on Thursday, which predicted the energy crunch will boost crude demand by 500,000 barrels per day.

That would result in a supply gap of around 700,000 bpd through the end of this year, until the OPEC+ adds more supply as planned in January.

The structure of Brent crude oil futures is showing a “scarcity premium” that has widened to the most since 2013 this week, a sign of the tight market underpinning oil’s rally amid a wider energy crunch as economies recover from the COVID-19 pandemic.

The premium of the immediate Brent crude contract to the December 2022 price stood at $8.13 a barrel on Friday after reaching $8.30 on Monday. The value on Monday was the highest since 2013, according to Refinitiv Eikon data.

Also at Russian Energy Week, Putin said it was “quite possible” oil prices could climb above $100 as energy demand rises.

He also used an interview at the forum to deny Russia is using gas as a geopolitical weapon and instead is ready to help Europe with additional energy supplies.


Saudi non-oil exports surge to record $33.4bn in H1 2021

Saudi non-oil exports surge to record $33.4bn in H1 2021
Updated 15 October 2021

Saudi non-oil exports surge to record $33.4bn in H1 2021

Saudi non-oil exports surge to record $33.4bn in H1 2021
  • Non-oil exports jumped 37 percent to a record SR125.3 billion
  • Saudi Arabia exported to 170 countries in the first half

RIYADH: Saudi non-oil exports jumped 37 percent to a record SR125.3 billion ($33.4 billion) in the first half of 2021, SPA reported.

Non-oil exports were SR91.7 billion in the first half of 2020.

They increase by 8 percent in quantity, equivalent to 34.7 million tons, suggesting a rebound in prices as volumes returned to normal.

Global trade collapsed last year as the COVID-19 pandemic forced much of the world into lockdown. However, trade has rebounded strongly this year and last week the WTO upgraded its forecast for global merchandise trade volume growth to 10.8 percent in 2021 and 4.7 percent in 2022.

Saudi Arabia exported to 170 countries in the first half, led by SR17.0 billion of goods to the UAE, followed by SR16.8 billion to China, and SR7.1 billion to India.

The petrochemical sector was the biggest source of exports with a value of SR73.6 billion in the period, up from SR51.2 billion during the same period last year, representing growth of 44 percent.

The H1 report follows data from the General Authority for Statistics that showed July’s non-oil exports increased 17.9 percent year on year to SR20.8 billion.

The total value of exports amounted to SR91.8 billion in July 2021, up from 51.1 billion riyals in July 2020, led by a 112.1 percent increase in oil exports.

However, oil exports continued to dominate Saudi trade with crude’s share increasing from 65.5 percent in July 2020 to 77.4 percent in July 2021.

Saudi Arabia is pushing to increase non-oil exports as it seeks to ween its economy off dependency on oil sales with a goal of raising the percentage of non-oil exports to 50 percent by 2030 and foreign direct investment from 3.8 percent to an international average of 5.7 percent.

The Kingdom is in negotiations with 11 countries on possible free-trade agreement, including China, India, Pakistan, Australia, New Zealand, Britain, Indonesia, the Philippines, Bangladesh, Sri Lanka, and the US.

The Kingdom aims to export services including transport, distribution, professional and financial services, communication services, postal services as well as express mail, media, hotel, construction and contracting, education and training, travel and tourism, environmental, and entertainment.

In August, the Saudi Export Development Authority said more than 900 Saudi companies with over 2,000 locally manufactured products had registered with the Kingdom’s “Made in Saudi” program, an initiative to boost the competitiveness of Saudi products at home and abroad.

The program gives top priority to 16 different economic sectors including chemicals and polymers, building materials, electronics, and packaging.

Additionally, the Saudi Exports Development Authority said in August it will identify over 120 international tendering opportunities in a number of target countries, mainly covering construction and industrial supplies and infrastructure projects.

In the same month, The Saudi Export-Import Bank signed a memorandum of understanding with the Federation of Saudi Chambers to provide importers and exporters loans and other financial services.


Saudi Energy Ministry launches tender for dry gas network in Dammam

Saudi Energy Ministry launches tender for dry gas network in Dammam
Updated 15 October 2021

Saudi Energy Ministry launches tender for dry gas network in Dammam

Saudi Energy Ministry launches tender for dry gas network in Dammam
  • Tender is for a pipeline network from the connection point with Aramco, which provides the gas, to all factories that need fuel in the city

RIYADH: The Saudi Ministry of Energy announced a public tender for a license to establish, own and operate a dry gas network in the Third Industrial City in Dammam in the Eastern Province.

The project includes a pipeline network from the connection point with Aramco, which provides dry gas, to all factories that need fuel within the region, the ministry said in a statement.

The license requires the design, construction, operation and maintenance of the dry gas local network in Dammam 3 at the expense of the license applicant for a period of 35 years in return for a service tariff approved by the ministry.

The license holder must meet 75 percent of requests in the industrial city within nine months from the date of granting the license, the ministry said.

Through the installation of the gas networks, the ministry is aiming to make Saudi Arabia’s industrial cities a more attractive environment for investors, to raise the efficiency and competitiveness of factories, and to reduce carbon emissions and the number of trucks that transport liquid fuels, it said.

Saudi Arabia is increasing its use of natural gas and renewables in power generation with a goal of a achieving a 50/50 split between the two by 2030.

Saudi Aramco is preparing to restart development of the giant Jafurah gas field in the eastern region of the country with plans to invest about $110 billion in the project, CNBC Arabiya reported in September.

The largest natural gas field in the Kingdom, stretching 170 km by 100 km, is estimated at 200 trillion cubic feet of rich raw gas.

Aramco has resubmitted several tenders for field development, including for the construction of the field’s dedicated power plant early next December, unnamed sources in the oil and gas industry told CNBC.

The Jafurah field will place Saudi Arabia third in the world in natural gas production by 2030, the Ministry of Energy has said.

Aramco expects the production from the Jafurah field to commence in early 2024 and reach about 2.2 billion cubic feet of gas per day by 2036. The field will also be able to produce about 425 million cubic feet of ethane per day, and about 550 thousand barrels per day of gas liquids and condensates.


Crypto has value but not for oil trading, says Russia’s Putin

Crypto has value but not for oil trading, says Russia’s Putin
Updated 15 October 2021

Crypto has value but not for oil trading, says Russia’s Putin

Crypto has value but not for oil trading, says Russia’s Putin
  • Russia has sought alternatives to trading in dollars since being slapped with sanctions in 2014 following the annexation of Crimea

RIYADH: Russian President Vladimir Putin signaled tolerance of cryptocurrencies, but is still not convinced they can replace the US dollar in settling oil trades.

“I believe that it has value,” he told CNBC in an interview at the Russian Energy Week event in Moscow Wednesday, the transcript of which was posted on the Kremlin’s website.

“It is legitimate and can be used in settlements, no doubt about that, but it is too early to use it for trading in oil or other raw materials and energy sources,” he said.

This comes after repeated warnings from the Bank of Russia that the crypto market is extremely volatile, and digital currencies are not allowed to be used for domestic payments.

Putin made it clear that contracts dominated in crypto would be a premature step as they are not stable.

In order to mine crypto, you need a lot of energy, and for that people have to use traditional sources of energy, primarily hydrocarbons, he said.

Russia has sought alternatives to trading in dollars since being slapped with sanctions in 2014 following the annexation of Crimea.

Crypto backers argue decentralized money will eventually replace fiat currencies issued by central banks.

“I believe the US is making a big mistake using the dollar as a sanction tool,” he said. “We are forced. We have no other choice but to move to transactions in other currencies.”

Putin also pointed out that the country is reducing the share of the US dollar in its reserves, as well as in settlements. “This is not always possible, but we try to switch to national currencies,” he said.

Some months ago, Russia’s deputy prime minister, Alexander Novak, suggested the country could move away from greenback-denominated crude contracts if the US continues to impose targeted economic sanctions.

In June, Russia announced it would drop US dollar assets from its sovereign wealth fund.