SINGAPORE/HOUSTON, Aug 26 – China has entrusted a defense-focused state-owned company with shipping millions of barrels of Venezuelan oil, despite U.S. sanctions, as part of a deal to offset thousands of millions of dollars of Caracas debt to Beijing, according to three sources and tanker tracking data.
Although China National Petroleum Corp (CNPC) stopped transporting Venezuelan oil in August 2019 after Washington tightened sanctions on the South American exporter, crude continued to find its way to China through traders who rebranded the fuel as Malaysian, one source previously reported.
Since November 2020, China Aerospace Science and Industry Corp (CASIC) has been transporting Venezuelan crude in three tankers it acquired that year from PetroChina, a publicly traded unit of CNPC, the sources said. The oil is stored in a tank farm that it also acquired from PetroChina, the sources said.
The three CASIC tankers load in Venezuela with their active transponders, which allows monitoring by third parties, according to data from Eikon.
The company has so far taken 13 cargoes carrying a total of some 25 million barrels of oil, including two vessels 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 for Merey crude, Venezuela’s benchmark, were declared “crude oil” at Chinese customs, without specifying their origin, one of the sources said.
“These shipments are made strictly under a (Chinese) government mandate, whereby CASIC was appointed to move the oil as payment to offset Venezuelan debt (to China),” the person said.
All three sources spoke on condition of anonymity due to the sensitivity of the matter.
Media departments at CASIC, China’s Ministry of Foreign Affairs and China’s General Administration of Customs did not respond to source requests for comment.
A CNPC representative declined to comment.
A second source said that while a portion of each shipment pays off Venezuelan debt, other goods, such as COVID-19 vaccines, are also subtracted from crude sales.
“All the money from the revenue stays in China. The Venezuelan Ministry of Foreign Affairs is in charge of reconciliation and accountability,” said this person.
At a rate of about 42,000 barrels per day (bpd), these shipments have increased the total Venezuelan oil to China to about 420,000 bpd between January and July this year, which is equivalent to about 3% of China’s consumption, according to Emma Li. , an analyst at Vortexa, which tracks these flows.
Officially, China has not reported any imports of crude oil from Venezuela since October 2019.
Venezuela’s debt dates back to 2007, during the government of former President Hugo Chavez, when the country borrowed more than $50 billion from Beijing under loan-for-oil deals.
Source 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, Source previously reported, but China and Venezuela have not said whether that period has ended.
GREEN CHANNEL
China, the world’s biggest oil buyer, has benefited in recent years from cheaper oil supplies from Iran and Venezuela, and has increased imports from Russia in recent months at a time of sour relations with Washington.
The country manages its crude oil imports with a rigid quota system for qualified refineries. CASIC shipments, without quota, are an exception, said the first source.
“They enter China through a special green channel,” the person said.
PDVSA and Venezuela’s oil and foreign ministries did not respond to one source requests for comment.
The US Treasury Department, which enforces the sanctions, declined to comment.
CASIC, which began in 1956 as a defense research arm that developed China’s first missile, has expanded over decades into a defense conglomerate specializing in space technology.
She was chosen for the oil job because she is politically powerful and has limited global financial exposure, making her less vulnerable to sanctions, the first source said.
Since 2015, the company has worked with state-owned oil giants such as CNPC and Sinopec on oilfield equipment manufacturing, digital technology and overseas projects, according to company websites.
TRANSFER OF OIL TANKERS AND STORAGE
CASIC’s Venezuelan oil shipments are transported by three large-tonnage vessels—Xingye, Yongle, and Thousand Sunny—according to PDVSA loading schedules and Vortexa and Refinitiv tracking of tankers.
CASIC took over the vessels from PetroChina in 2020, shortly after PetroChina took control of it following a legal dispute with PDVSA over the assets involved in a bankruptcy of the joint venture, two sources told to a source. PetroChina told to a source in 2020 that it had transferred 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 shipments of Venezuelan oil received by CASIC were originally picked up at the port of José by Cirrostrati Technology Co LTD, a firm with no history in oil trading, which acted as an intermediary only for these shipments, according to PDVSA schedules.
Cirrostrati could not be reached for comment. Source was unable to locate company registration or incorporation information, or independently determine other links between Cirrostrati and CASIC.
The oil shipped by CASIC is mainly consumed by China’s independent refiners, which have increasingly turned to cheaper crude from Iran and Venezuela and, more recently, from Russia, to maintain their operations.
An independent refiner said he was offered the oil at $8 a barrel below benchmark ex-storage Brent crude, versus a discount of more than $30 for similar quality crude marketed as a Malaysian export.
“It’s more expensive, but it’s good that the government is taking over these Venezuelan supplies, which saves us a lot of logistical headaches and sanctions-related risks,” a refiner executive said.