According to a Reuters report, a Chinese company has been entrusted to ship millions of barrels of Venezuelan oil despite the US sanctions. This is part of a deal to offset Caracas' billions of dollars of debt to Beijing.
China National Petroleum Corp (CNPC) stopped carrying Venezuelan oil in August 2019 after Washington tightened sanctions on the South American exporter. But it continued to find its way to China via traders who rebranded it.
Since November 2020 China Aerospace Science and Industry Corp (CASIC) has been carrying Venezuelan crude on three tankers it acquired from PetroChina. The oil is stored on a tank farm it also took over from PetroChina.
The firm has taken 13 cargoes carrying a total of about 25 million barrels of oil, including two vessels due to arrive in China in September, according to the loading schedules of Venezuelan state oil firm PDVSA, and tanker tracking data from Refinitiv and Vortexa Analytics.
The 13 shipments, worth about US$1.5 billion at formula prices for Venezuela’s flagship-grade Merey crude, were declared "crude oil" at Chinese customs, without specifying origin.
" shipments are strictly under a government mandate, where CASIC was designated to move the oil as payment to offset Venezuelan debt to China.
Without commenting on debt offset, China's Foreign Ministry said on Friday the two nations are engaged in cooperation over oil for humanitarian goods.
“The cooperation meets Venezuela's current needs and is also in line with humanitarian principles," a Ministry spokesperson said, adding that China opposes US unilateral sanctions and long-arm jurisdiction.
Another source said that although part of each cargo pays down debt, other goods, such as COVID-19 vaccines, are also being subtracted from the crude sales.
All money from proceeds stays in China. Venezuela’s Foreign Affairs Ministry is in charge of conciliation and accountability.
At roughly 42,000 barrels a day, these shipments have increased total Venezuelan oil to China to about 420,000 bpd between January and July this year, equivalent to about 3% of China's consumption, according to Emma Li, analyst with Vortexa, which tracks such flows.
Venezuela's debt dates to 2007, the era of then-President Hugo Chavez, when the country borrowed more than US$50 billion from Beijing under loan-for-oil deals.
China, the world's top oil buyer, has over the past few years benefited from cheaper oil supplies from Iran and Venezuela, and has in recent months ramped up imports from Russia amid soured relations with Washington.
CASIC, which started in 1956 as a defence research arm that developed China's first missile has over the decades expanded into a defence conglomerate specializing in space technology.
It was picked for the oil job because it is politically powerful and has limited global financial exposure, making it less vulnerable to sanctions.
The company has since 2015 worked with state oil giants, including CNPC and Sinopec, in petroleum equipment manufacturing, digital technology and overseas projects.
The CASIC Venezuelan oil shipments are transported by three Very Large Crude Carriers - Xingye, Yongle and Thousand Sunny, according PDVSA's loading schedules and ship tracking by Vortexa and Refinitiv.
All Venezuelan oil cargoes received by CASIC were originally picked up at the Jose port by Cirrostrati Technology Co, a firm with no track record in oil trading, acting as intermediary for only these cargoes.
The oil shipped by CASIC is mostly consumed by China's independent refiners, which have increasingly relied on cheaper crude from Iran and Venezuela and more recently Russia to maintain operations.
One independent refiner said they were offered the oil at US$8 per barrel below benchmark Brent crude ex-storage basis, versus a discount of more than US$30 for similar-quality crude marketed as a Malaysian export.
"It is more costly, but it's good that the government is now taking charge of these Venezuelan supplies, which saves us lots of logistics headaches and sanction-related risks," said an executive with the refiner.
