Venezuela’s state-owned oil company PDVSA plans to indefinitely halt the production of upgraded Orinoco Belt synthetic crudes in August, and instead is converting its upgraders to blending facilities for the production of Merey 16 crude, according to an internal report reviewed by S&P Global Platts Wednesday However, as US sanctions have prevented imports of light crude and heavy naphtha into Venezuela, PDVSA is bracing for another fall in crude production and exports in August, according to the report.

PDVSA operates four upgraders in the Orinoco: the 190,000 b/d Petropiar joint venture with Chevron; the 120,000 b/d Petromonagas JV with Russia’s Rosneft; the 202,000 b/d Petrocedeno JV with Total and Equinor; and the out-of-service 120,000 b/d Petro San Felix.

According to PDVSA’s August crude report, Petropiar is operating at 58% of capacity, Petromonagas at 50% and Petrocedeno at 46%.

Synthetic crudes produced at the upgraders, such as Special Hamaca Blend and Zuata Sweet, were destined for refineries in the US before sanctions were imposed in January and have since been sold “under unfavorable market conditions” to Asia, the PDVSA report said.

The company noted it “has been forced to offer significant discounts that have affected the value of such crudes and complicated their placement since some customers have refused to accept delivery of the sale.”

In January, the US unveiled sanctions on PDVSA which have served as a de facto ban on US imports of Venezuelan crude and an immediate ban on US exports of diluent to Venezuela. On April 28, the US prohibited transactions between non-US firms and PDVSA involving the US financial system, essentially banning the use of US dollars in all transactions with PDVSA.

In June, the US Treasury Department announced further prohibitions on essentially all diluent trade with PDVSA, which PDVSA uses in the production and marketing of its heavy crudes.

Three Orinoco upgraders have been converted to mixing facilities for the exclusive purpose of producing Merey 16. However, the upgraders are expected to operate below capacity, owing to the diminished availability of light crude and naphtha for diluent.

According to PDVSA, the upgraders “have significant technical operational weaknesses that are resulting in the production of upgraded crudes outside the quality specifications demanded by new markets, a situation that limits the possibility of marketing them, as much for exportation or to domestic refineries.”

The PDVSA report estimates Venezuela’s crude production could fall to 988,000 b/d in August from 1.2 million b/d at the start of June. However, the PDVSA production estimates exceed reports by secondary sources, and even other internal reports, as they most likely include diluents being blended with Venezuela’s heavy crude.

The latest Platts OPEC production survey shows Venezuela produced 760,000 b/d in June.

PDVSA estimates that its August crude exports will fall to 685,000 b/d from 776,000 b/d in June. Exports will consist primarily of Merey 16, a mix of extra heavy crude from the Orinoco Belt and diluent.

Because PDVSA is unable to obtain light crude and heavy naphtha for diluent, however, the company will resort to using its increasingly scarce output of Mesa 30 and Santa Barbara light crudes as a blending diluent.