March 29, 2005
Venezuela's PDVSA launches new oil pricing system

(Reurters) - "Venezuelan state oil company PDVSA is applying a new pricing system to eliminate heavy discounts some clients enjoyed on new crude sales contracts, the company said.

President Hugo Chávez insists the supply contracts signed by PDVSA under previous administrations are costing Venezuela millions of dollars annually in lost revenues. Under the new system, the OPEC nation's crude will be priced using formulas incorporating prices of other reference oil grades published in industry publications such as Platt's and Petroleum Argus, PDVSA said in a statement.

The formulas will be determined by a special Export Price Committee (Copex) created by PDVSA and Venezuela's Ministry of Energy.

'This committee is charged with making decisions in relation to the sale prices of crudes in the international market, under the premise of guaranteeing the best value in the most transparent conditions,' PDVSA said (...)

The government has sharply criticized several long-term supply contracts with U.S. refiners, especially those with PDVSA's U.S. refining arm Citgo, for selling crude at steep discounts to benchmark crudes. PDVSA has been studying ways of modifying these terms since last year (...)

Government officials have in the past described the new pricing system as similar to the one utilized by Mexican state oil firm PEMEX, whereby the company modifies certain constants in the formula price for its crude on a monthly basis.

'Theoretically, this means you will get more money going back to Caracas,' Jan Stuart, analyst for FIMAT USA said. In addition, PDVSA said it would only sell crude directly to refiners and not to third-party traders (...)".