UPDATE 2-NuStar cuts Venezuela oil pact for asphalt plants, eyes Canada

Fri Nov 8, 2013 8:15pm EST
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By Marianna Parraga

Nov 8 (Reuters) - U.S. oil company NuStar Energy said on Friday it had agreed to sever a crude supply contract with Venezuela's state-run PDVSA 15 months early, a move sources said would allow it to use cheaper Canadian crude for its East Coast asphalt plants.

While the 30,000 barrel per day (bpd) supply contract is equivalent to only about 4 percent of total U.S. imports from Venezuela, the decision to end the contract is the latest sign of how growing North American oil production is reducing imports and giving refiners more options.

The termination, effective in January, came after both companies reached a mutual agreement that NuStar said will reduce its financial liability. The original termination date of the contract was March 2015.

A spokesman of San Antonio, Texas-based NuStar was not immediately available to give more information about the termination.

But two trade sources said the best option for NuStar was to replace the Venezuelan supplies with Canadian heavy naphthenic crudes that can be transported by rail to the East Coast, reducing costs for the company.

"The deal will significantly reduce financial liability for NuStar Energy LP and will allow NuStar Asphalt Refining LLC the additional refining flexibility to meet current market demand," said Curt Anastasio, president and chief executive officer of NuStar Energy LP.

The Paulsboro, New Jersey, and Savannah asphalt refineries signed the supply contract with PDVSA in 2008, after being sold to NuStar by PDVSA's subsidiary Citgo, and were receiving Bachaquero and Boscan heavy crudes in recent years.   Continued...