This resolution is intended to regulate the sale of diluted crude oil made by Petróleos de Venezuela S.A and its subsidiaries.
In the Official Gazette No. 41,399 dated May 17, 2018 was published the Resolution N° 050 (the “Resolution”). The purpose of the Resolution is to establish the regulations of the sale of Diluted Crude Oil (“DCO”) in case the Republic must do so by way of exception, and for export purposes, as well as for the calculation of any special advantage that according to the law has been agreed in favor of the Republic, as follows:
- The Resolution applies to PDVSA Petróleo, S.A, the subsidiaries of Petróleos de Venezuela, S.A. and the Mixed Companies that are currently operational.
- The DCO will be valued using the calculation formula indicated in the Resolution, using as a reference the price of Merey crude, plus a K Factor of adjustment, competitiveness and market parity. This will allow to balance the commercial relations between the companies indicated above based on the price reference of the Merey.
- The price of the DCO will be determined according to the following formula:
Diluted Crude Oil (DCO) (16,0° API; 3,3% sulfur): PPCD = MEREY + KDCO – AT
PPCD = Price of Diluted Crude Oil (DCO) (US $ / barrel).
MEREY = Formula price of Merey crude oil according to the destination market (Gulf of Mexico, Northwest Europe, Asia or Caribbean) in the month in question (US $ / barrel).
KDCO = Constant for diluted crude oil according to the destination market (Gulf of Mexico, Northwest Europe, Asia or Caribbean) (US $ / barrel). This constant will have the purpose of neutralizing possible distortions that could be generated given the reference prices of the Diluted Crude Oil (DCO) and the prevailing market conditions for said crude oil in each of the markets, during the month in question (competition, parity, market adequacy, refining and other factors that affect supply or demand).
AT = Adjustment for transport that will be equal to the distance from the production field to the port of shipment measured in kilometers, multiplied by US $ 0.00125 per barrel and per kilometer.
4. Any change, alteration, modification, substitution or non-application of the formula will entail the implementation of sanctions in accordance with the current legal system, without prejudice to the corresponding civil, criminal, fiscal or administrative actions.
5. If the sanctions indicated above were imposed on a State company, the provisions of Article 67 of the Organic Hydrocarbons Law will apply.
6. The additional costs or damages caused to PDVSA Petróleo, S.A., due to the delay of ships anchored in wharves located in Venezuelan waters, as well as the deficit in property derived from penalties established in supply contracts or purchase agreements of DCO, or in general for the breach of the Resolution, must be compensated by the breaching companies in the same terms in which they were caused.
7. Mixed Companies that administer upgraders and/or mixing plants, must present to the Ministry of the People’s Power for Petroleum an Operational Plan for Optimization, Adequacy, Preventive and Corrective Maintenance that efficiently allows the best management and operational capacity of the upgraders, within ninety (90) days following the publication of the Resolution in the Official Gazette of the Bolivarian Republic of Venezuela.
8. The evaluation, analysis and recommendations of the aforementioned Operational Plans will be carried out by the Offices of the Vice ministers of Hydrocarbons and Refining and Petrochemicals, within fifteen (15) business days following their receipt at the Ministry of Oil and will be presented to the highest authority for consideration.
The Resolution will enter into force as of its publication in the Official Gazette of the Bolivarian Republic of Venezuela.
This Legal Report presents a general description of relevant aspects of the Resolution N° 050 and does not constitute a legal opinion aimed at addressing a specific situation. In the case of any doubt, comment, or to obtain further information, please contact us through our website www.interjuris.com.
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