PetroChina's Guangdong Petrochemical to receive first Venezuelan crude cargo around March 23

PetroChina's Guangdong Petrochemical in southern Guangdong province will receive a Venezuelan Merey crude cargo around March 23, a source with close knowledge of the matter said March 21.

The shipment will be the first Venezuelan crude oil cargo directly imported by the state-run refinery since its commissioning in late February 2023. The refining complex has been designed to process heavy sour crude, the source added.

The Panama-flagged 306,206 dwt VLCC Elysia departed the Jose oil export terminal on Feb. 2. The tanker will likely call Jieyang port on March 23 to discharge 289,000 mt of Merey crude, shipping data from S&P Global Commodities at Sea showed.

Officials at Guangdong Petrochemical, however, declined to comment on the cargo.

"The API gravity of most crude grades the refinery has processed is in the 20-30 range," the source said.

Venezuelan Merey crude needs to be mixed with other crudes before being fed into crude distillation units due to its high sulfur content, the source added.

Merey is a heavy sour crude with a gravity of 16 API and a 2.7% sulfur content.

Guangdong Petrochemical has been expanding its feedstock basket by screening more than 50 different crude grades, with the complex cracking 27 crude grades in 2023. The refinery purchased a total of 69 crude cargoes in the international market last year.

The proportion of heavy crude grades in the total feedstock imports increased sharply to 70% recently, from around 40% in early 2023, PetroChina said in a newsletter March 20.

China's state-owned refineries typically avoid importing Venezuelan crudes, but Guangdong Petrochemical's latest purchase was made possible after the Biden administration on Oct. 18, 2023 partially eased sanctions on Venezuela's oil and mining sector for six months to April 18, 2024, according to refinery and trade sources.

Unlike state-run companies, however, China's independent refineries have been the main customers of Venezuelan crude cargoes ever since the sanctions were imposed in October 2019.

Guangdong Petrochemical, which is located in southern China's Jieyang city, was initially proposed for construction in 2011 in a 60-40 ratio joint venture between PetroChina and Venezuela's state-run PDVSA. The complex was at first planned to be designed and configured to process only Venezuelan Merey crude or diluted crude oil.

Although PDVSA withdrew from the project due to financial issues, Venezuelan Merey crude remains on the list of major crude slates for the complex, which also includes heavy crude grades from Iraq and Iran.

Latest imports in February

China imported 352,455 mt, or around 2.29 million barrels, of Venezuelan crude in February, marking the first official shipment from the South American supplier since October 2019, the latest data from the General Administration of Customs showed.

201,000 mt of the Venezuelan barrels were purchased by enterprises registered in Beijing, and 151,455 mt went to enterprises registered in Shandong, GAC data showed.

State-run PetroChina likely bought some of the South American crude barrels in February, with the heavy sour crudes discharged into its storage tanks in Zhanjiang city, Guangdong province, a source close to the matter said.

Although China's independent refiners regularly import Venezuelan crudes, the trade details are not officially recorded in GAC data as the private sector players typically mask the shipments as Malaysian-origin crude oil.

Venezuelan heavy sour crudes were offered at around $8-$9/b discount against ICE Brent futures on a DES Shandong basis, trade sources said.