Thai tanker owner Prima Marine has become the latest potential victim of US president Donald Trump’s sanctions campaign against Venezuela.
Bangkok-based Tipco Asphalt, which charters one of Prima's VLCCs as a floating storage unit (FSU), has been targeted by the US over its use of crude purchased from the South American country.
Tipco Asphalt said it was initially contacted by the US embassy in Thailand about its procurement of Venezuelan crude oil in December 2019.
Its asphalt refinery in Kemaman, Malaysia is specifically designed to refine heavy crude oil from Venezuela. Since its commissioning in 2007, 90% of the refinery’s feedstock was sourced from Venezuela.
Then in late August, it was contacted by the US State Department and asked to “wind down” its crude imports from Venezuela by the end of November 2020.
The company was allegedly warned that in the event of non-compliance, it would be “subjected to US sanctions”.
Consequently, Tico Asphalt said it was now “taking steps to comply with the request” in order to avoid any such potential sanctions.
“The Kemaman refinery will have to shut down temporarily until the sanctions against Venezuela are lifted or we find an alternative feedstock,” the company said.
The Thai-listed refiner company is reported to have just renewed its charter of the Prima Marine FSU in the third quarter until the end of 2021.
However, the tanker owner is said to have not yet received any notice from Tipco Asphalt about a potential termination of the charter contract, according to analysts.
Figures compiled by Bloomberg say that Tico Asphalt was the fourth largest buyer of Venezuelan crude behind India, China and Cuba.
“In a worst case scenario that Tipco Asphalt terminates the FSU contract with Prima Marine, we expect a minor impact on Prima Marine as the deal accounted for just 4% of its total revenue in the second quarter of 2020,” said Kasikorn Securities analyst Pisut Ngamvijitvong.
“We expect Prima Marine to be able to immediately replace the Tipco Asphalt charter with another client due to strong demand for FSU.”
Ngamvijitvong said the recent sell-off of Prima Marine’s shares as a result provided a “buying opportunity” as it was an overreaction to the news.
