European oil majors Eni and Repsol plan to expand an oil-for-debt deal with Venezuela under U.S. approval, aiming to supply refined products to state firm PDVSA and boost oil deliveries to Europe, three people close to the matter said.
As Western sanctions last year cut the flow of Russian oil to Europe, Eni and Repsol received authorization from the U.S. State Department to take Venezuelan crude and process it in European refineries, to recoup accumulated debt and dividends from their joint ventures in the South American country.
The original "comfort letters" created exemptions to U.S. sanctions on Venezuela's oil industry that have curtailed the OPEC member's oil exports since 2019. But they did not allow oil swaps and banned cash payments to PDVSA, an arrangement that irked the Venezuelan firm.
Under the revised terms, Eni and Repsol can supply the state company with fuels, potentially helping Venezuela ease an intermittent scarcity that has led to long lines at gasoline stations in recent years.
The first fuel delivery under the expanded agreement, consisting of some 330,000 barrels of naphtha, is scheduled to arrive in PDVSA's Cardon port this week from Italy's Milazzo refinery, operated by a consortium of Eni and Kuwait Petroleum, according to Refinitiv Eikon data.
PDVSA did not reply to a request for comment. Eni and Repsol were not immediately available to respond to a Reuters request for comment.
A U.S. State Department spokesperson has said it would not discuss "specific communications with companies." The White House declined comment.
Since the U.S. imposed oil sanctions on Venezuela in 2019, oil swaps have provided ways for companies to receive payment for joint-venture debt, sometimes also securing refined products PDVSA can distribute domestically.
Crude received by Eni and Repsol under their swap deal has mostly been sent to Repsol's refineries in Spain. But PDVSA has only allocated seven oil cargoes so far this year to Eni, which acts as offtaker for both firms, limiting the deal's reach.
