Venezuela suspends oil-for-debt deal with Eni, Repsol

The Venezuelan government has suspended new crude shipments to Europe under an oil-for-debt deal and asked Italy's Eni and Spain's Repsol to provide fuel in exchange for future cargoes, three people familiar with the matter said.

The Venezuelan oil company PDVSA has no longer been interested in the oil-for- debt deals that the U.S. State Department authorized in May, according to sources. The state company was allowed to resume shipments to Europe after a two-year suspension caused by U.S. sanctions.

Washington authorized the shipments as long as cargo proceeds were used to pay off debt PDVSA owed to joint ventures with Eni and Repsol.

PDVSA wants to go back to oil swaps, but that is not possible yet, said a person involved in cargoes previously delivered to Europe. Since the invasion of Ukraine, Venezuelan oil shipments, particularly those sent to refineries in Spain, have helped Europe reduce purchases of Russian oil. The deal hasn't provided enough cash or fuel to PDVSA, whose refineries are struggling to produce gasoline and diesel after years of underinvestment and lack of repairs.

PDVSA, Eni, Repsol and the U.S. State Department did not respond immediately to requests for comment.

According to PDVSA's shipping schedules, there are no loading windows assigned to Eni or Repsol for Europe-bound cargoes in August, even though stocks of diluted crude oil DCO at the Jose port rose to almost 5 million barrels as of August 8.

PDVSA wants to get fuel in exchange for crude, while using a portion of the cargoes' value to offset billions of dollars in debts to joint venture partners, including Chevron, Eni and Repsol, according to the sources.

The deal reshuffle could help the Venezuelan company relaunch its Orinoco Belt extra heavy oil operations, which need imported diluents, such as heavy naphtha, and help the country's motor fuel deficit.

PDVSA relies mostly on Iranian diluents to turn its extra heavy crude into exportable grades.

According to the PDVSA's documents and tanker tracking data, Eni received a total of 3.6 million barrels of Venezuelan diluted crude oil DCO since June. Most of the volume was later delivered by Eni to Repsol, which has a larger capacity for refining the South American country's heavy sour crude grades.

In late July, Repsol's CEO Josu Jon Imaz said that the return of cargoes from Venezuela was good news for its refineries, as the quality of those crudes matches perfectly with its refining system.

The documents and vessel monitoring showed that the resumption of oil shipments to Europe helped PDVSA boost sales in June and July, with overall exports reaching 545,000 barrels per day bpd in the 60 day period.

The export increase was offset by operational issues. PDVSA plans to restart a third heavy crude upgrader, at the Petromonagas joint venture, which will boost crude production and export capacity. It resumed operations at an oil-blending station and two upgraders that had been hit by power and gas outages last month.