July 18, 2017 / 6:18 PM / a year ago

UPDATE 1-Court orders PDVSA to allow sale of oil at Sovcomflot's request

(Adds quote from the ruling and details, changes dateline)

By John van Kerkhof and Marianna Parraga

PHILIPSBURG, St Maarten/HOUSTON, July 18 (Reuters) - A court in the Caribbean island of St. Maarten has ordered Venezuelan state-run oil company PDVSA to cooperate in the sale of 500,000 barrels of crude oil in its dispute with units of Russian shipping firm Sovcomflot, according to a copy of the decision seen by Reuters on Tuesday.

In March, the same court ordered the roughly $20 million in Venezuelan oil to be held until state-run Sovcomflot’s claim for $30 million in unpaid shipping fees is decided in a pending action by a British admiralty court. PDVSA rejects the claim.

Proceeds from the oil sale must be deposited into an escrow account at a Dutch or Antillian bank until the two sides reach a final agreement, the court said.

The crude has been stored at a rented facility on the neighboring island of St. Eustatius, but Sovcomflot IPO-SKF.MM requested the oil be sold to a third party, arguing there was no guarantee that the crude would be insured while at the terminal.

“The Court of First Instance condemns PDVSA to cooperate on sale by ship owners of the cargo oil... to the best possible terms, including as high a price as possible,” said the order dated July 7 and seen this week.

PDVSA did not immediately respond to a request for comment.

The court action suggests even political allies of Venezuela such as Russia are losing patience with PDVSA’s payment delays. The Venezuelan company’s obsolete tankers are struggling to export oil and supply fuel to its domestic market.

The court absolved PDVSA of trial costs but said it must pay a penalty of $500,000 per day up to a maximum of $5 million if it fails to comply with the ruling.

It was unclear when the penalty would begin. A PDVSA source said the company would auction the oil as soon as possible.

PDVSA in October sent the cargo on tanker NS Columbus to St. Eustatius, planning to sell the crude from there. But the owner of the tanker, a unit of Russian conglomerate Sovcomflot, asked a Caribbean court to seize the oil in hopes of collecting partial payment.

Five months after crossing the Caribbean, the NS Columbus discharged the crude at the Statia terminal in St. Eustatius, owned by U.S. NuStar Energy, where PDVSA rents storage tanks, under a temporary decision by the St. Maarten court. (Reporting by John van Kerkhof and Marianna Parraga; editing by Gary McWilliams and Cynthia Osterman)

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