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Oil and Gas

UPDATE 1-Venezuela's PDVSA to restart two key oil upgraders to boost output -document

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March 4 (Reuters) - Venezuela’s state-run PDVSA plans to restart operations at two key oil upgraders in the coming months after a year of inactivity aiming to boost output of its flagship grade for exports, according to a company document seen by Reuters on Wednesday.

Mounting inventories of unsold oil following sanctions imposed by the United States forced PDVSA in May 2019 to halt most of its crude upgrading activity. The decision affected the nation’s oil production, which last year declined to its lowest level in almost 75 years.

The new plan involves turning the Petrocedeno upgrader, operated by PDVSA, France’s Total and Norway’s Equinor into a blending station in May for producing Merey 16 heavy crude, Venezuela’s best-selling grade.

The Petromonagas project, operated by PDVSA and Russia’s Rosneft, would follow the same strategy in July.

PDVSA did not immediately respond to a request for comment.

The Venezuelan firm converted its Petropiar project, operated along with U.S. Chevron Corp, into a blending station in the third quarter and in January it resumed normal upgrading operations for producing and exporting Hamaca crude.

The move has contributed to a slight recovery in output and exports in recent months, even amid tightening U.S. sanctions, according to company documents and Refinitiv Eikon vessel tracking data.

Washington earlier this year warned oil firms doing trade transactions with PDVSA that more sanctions would come as part of its “maximum pressure” strategy to oust Venezuelan President Nicolas Maduro. In February, it added Rosneft’s trading arm, Rosneft Trading SA, to its list of sanctioned companies.

Venezuela lost a third of oil exports in 2019 mostly due to sanctions, which deprived it from its primary market, the United Stated.

Obstacles to ship and sell its oil have also knocked down production. To avoid further declines, PDVSA last year reshuffled operations to produce Merey 16 crude almost entirely, as that is the grade preferred by the Asian buyers that have continued processing Venezuelan oil amid sanctions.

PDVSA’s oil exports increased 9% in February to about 1.05 million barrels per day (bpd) as some customers rushed to buy ahead of a May deadline set by the United States to wind down purchases of Venezuelan crude through Rosneft.

But PDVSA’s export program for March is partially empty, with only seven large cargoes so far confirmed to set sail from the nation’s main terminal of Jose this month.

Reporting by Marianna Parraga in Mexico City Editing by Chizu Nomiyama and Lisa Shumaker

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