By Marianna Parraga
HOUSTON Nov 14 (Reuters) - State-run Petroleos de Venezuela (PDVSA) awarded a contract to sell three cargoes of heavy Laguna, Bachaquero and Bachblend crudes at wide discounts from Brent to U.S. company Houston Refining, a trader close to the deal told Reuters on Thursday.
The tender is an unusual move from PDVSA, which sells almost all of its production through long-term supply contracts, mainly to its Citgo unit in the Unites States and close allies such as China's CNPC and India's Reliance.
Houston Refining, formerly known as Lyondell-Citgo Refining (LCR), operates a 270,000 barrel per day refinery located on the Gulf Coast in Texas. Citgo had a 41.25 percent stake in the plant until it was sold in 2006 to its majority partner, Lyondell Chemical.
During the Citgo-Lyondell partnership, a long-term supply contract of 240,000 bpd allowed the refinery to process Venezuelan crudes, but after it expired in 2012, the unit has been processing different types of heavy Canadian and Colombian crudes.
A 300,000-barrel cargo of heavy Bachaquero crude offered in the tender was sold at $20.50 per barrel below ICE Brent , the trader said. He said prices for the other two crudes were also low.
"It's a really low price. Houston Refining has been cutting purchases of Venezuelan crudes since 2012, but this is a good opportunity to buy," he said.
Colombian heavy Castilla crude was sold last month at a discount of some $11 per barrel below Brent.
Almost all the production of Venezuelan Bachaquero crude used to be bought by U.S. oil company NuStar Energy to feed two asphalt refineries previously owned by Citgo, but the firm last week agreed with PDVSA to scrap a supply pact over costs. NuStar suggested prices in the contract were above market rates.
The company added that the 30,000 bpd Venezuelan contract will be replaced mostly with Canadian crudes, but it could buy PDVSA's crudes via tenders.
"The release from this contract provides us flexibility to increase and expand our receipts of Canadian crude and to pursue and purchase economic waterborne crudes, including spot purchases of Venezuelan crude when they are profitable," Claire Riggs, public affairs director of NuStar Asphalt, told Reuters.
While NuStar looks for replacements, PDVSA is starting to tender heavy crudes produced in western Venezuela, such as Bachaquero, Laguna and a blend of five types called Bachblend 17.
The termination of high-priced supply contracts combined with more tenders of heavy crudes could help explain why the price of Venezuela's oil basket has dropped since August to below West Texas Intermediate..