VENEZUELA - Oil Pricing.

To secure its position at a leading oil supplier to the US, PdV M&M is in keen competition with Saudi Aramco and Pemex of Mexico in the pricing of its exports. Official prices for its crude oils are set forward in line with market developments. Prices for oil product exports are set according to short-term spot market quotations.

However, Saudi Aramco and Pemex have become the main oil suppliers to the US, with PdV M&M coming third. Often Saudi Aramco becomes the number one oil supplier to the US, with exports to the American market occasionally exceeding 1.45m b/d. Total PdV M&M exports to the US now average about 1.37m b/d.

Saudi Aramco has become one of the top three oil exporters to the US since mid-1998, when its American refining and marketing assets in 50-50 partnership with Texaco (Star Enterprise) were merged with those of Texaco and Shell. The merged entity, Motiva Enterprises, became the biggest refiner and marketing venture in the south and east of the US. On Oct. 9, 2001, after Texaco's merger with Chevron, Saudi Aramco raised its stake in Motiva to 50% with the other 50% held by Shell. The increase in their shares resulted from the two companies' purchase of Texaco's equity (see Saudi survey in OMT 19).

From mid-1997 until mid-1998, PDVSA used to be the main oil exporter to the US. Until mid-1997, Pemex was the biggest oil exporter to this market) and Saudi Aramco was second.

Venezuela's main export crude oils to the US and the other markets are: Leona, 24 deg. API with 1.5% sulphur; three BCF grades ranging from 24 deg. API with 1.9% S to 17 deg. API with 2.5% S; Bachaquero, 13 deg. API with 2.6% S; and Pilon, 13 deg. API with 2.3% S.

PdV M&M's Mesa/Furrial crude oil, a medium sour grade, is traded freely on the spot market. It is becoming a marker on the US spot market and in the Caribbean. The crude trades at a large discount to WTI. PdV is also promoting a light/sweet crude, Santa Barbara, on the spot market with its price set at an advantage relative to WTI. The volume of Mesa/Furrial sold on the spot market has risen by more than 60% since mid-1966 to almost 300,000 b/d. Before the restructuring was completed, Lagoven had expanded the capacity of Mesa/Furrial fields to reach 400,000 b/d by end-1999.

PdV M&M opened a new business unit in Houston in Feb. 2000 to expand its marketing and other commercial activities in the US and other parts of the world. Called PdV Trading, it provides services for the purchase and sale of crude oils and petroleum products from third parties.

A few months later PdV Trading opened offices in London and Singapore. Together with the Houston unit, these trade in non-Venezuelan crudes and fuels and earn addition income for the Caracas government.

PdV M&M buys foreign crude oils, including Basrah Light from Iraq, the heavy and sour Maya grade from Mexico and Oriente from Ecuador, to optimise its local refining system. It also uses Maya as a pricing reference for its own heavy sour sales. Occasionally it swaps crudes with NIOC International, supplying Iranian grades to its JV refining system in Germany in return for Venezuelan crudes sent to Iran's clients in Chile and Brazil.

From a terminal in the Bahamas, PdV M&M earlier in 2001 launched internet bunker sales through the e-trade sites Bunkerstem and OceanConnect. It said it hoped to move 20% of its $150m/year bunker states through the internet. In test operations in mid-2001, PdV M&M used the Pepex e-trade site and tendered a jet fuel cargo and 300,000 barrels of light cycle oil