Light at the End of the Tunnel
Two roadblocks were recently knocked down for the Swedish oil refiner Nynas, a joint venture between Venezuela’s state-owned Petroleos de Venezuela S.A. and Finland’s Neste Oil, on its road to a more solid financial footing.
The first was in March, when a Swedish court approved the extension of an ownership restructuring plan to avoid falling foul of United States sanctions on Venezuela, as well as open access to funding. In late 2019, the company was placed in the hands of a court-appointed administrator. The company said the restructuring plan does not call for laying off any of its 1,000 employs in Sweden, the United Kingdom or Germany.
More than a decade ago, the U.S. placed sanctions on the South American country while under the rule of President Hugo Chavez. Chavez came to power in 1999 and quickly took tighter control of PDVSA. However, within the past few years, the Americans increased sanctions in the hopes of driving out President Nicolas Maduro.
The world’s largest supplier of naphthenic base oils and lubricants now has until June 15 to finalize the plan, the cornerstone of which is that shareholders agree to “significant changes” in the ownership structure. The changes comply with the U.S. Treasury Department’s Office of Foreign Assets Control, which allows Ofac to swiftly initiate its process of removal of sanctions against Nynas. In a press release, Nynas said Ofac will remove sanctions once PDVSA decreases its ownership interest.
“Intense work to implement the measures and actions required to satisfy Ofac’s demands are now ongoing,” the company said.
“The sanctions against PDVSA and Venezuela have had a considerable negative impact on Nynas’ operations. It is therefore necessary to immediately make changes to the ownership structure,” the company said in a 17 page document obtained by Reuters. Lubes’n’Greases’ request for a copy of the document was unanswered.
Meanwhile, the Swedish refiner continues to purchase crude oil, and negotiations are “progressing” with its largest customers for agreements on financing and deliveries of bitumen, also known as asphalt. Additionally, Stockholm-based Carnegie Investment Bank AB, Nynas’ financial advisor, is working on a two-pronged financial package consisting of short- and long-term financing with potential lenders and investors, the company said. At the end of January, financial media outlets reported Nynas was seeking $158 million in short-term financing.
Then, in early April, Nynas’ GL 13E license was extended granting additional time to finalize the process to lift sanctions. A GL 13E license issued by Ofac allows companies to continue trading with proscribed countries without breaching U.S. sanctions. For Nynas, the license’s renewal allows the company to continue sales of its Venezuelan crude-derived products already in inventory. But it does limit new “sourcing” of Venezuelan crude and oil products, according to the company.
Nynas told Reuters even if Ofac approves the changes, it does not anticipate buying Venezuelan oil, meaning it must find new suppliers and adapt equipment.
“The extension should not be seen as wind-down license, it was necessary to have time to finalize the changes in shareholder structure accepted by Ofac as a prerequisite to lift the sanctions on Nynas,” the company advised.
Nynas has two plants in Europe: a 400,000 metric tons per year facility in Nynashamn, Sweden, and a 330,000 t/y plant in Harburg, Germany, which it bought from Shell in January 2014.