WARSAW (Reuters) -Polish oil refiner Orlen has cancelled contracts to buy Venezuelan oil and refined products after losing more than $400 million on prepayments for deliveries it never received, a company manager said on Tuesday.
Oil and tanker charter contracts put in place by the Swiss based unit Orlen Trading Switzerland (OTS) were scrapped as tankers weren't loading and a U.S. sanctions window was about to close, the person said.
The U.S. Treasury Department in October issued a licence lifting sanctions on Venezuela's oil production and exports through mid-April, prompting trading houses to buy cargoes from little known intermediaries registered as customers of state company PDVSA.
The loading of six tankers, including three Very Large Crude Carriers (VLCC), initially scheduled for December and January, was not completed in March.
With daily demurrage costs of $600,000 and the April 18 sanctions window closure date nearing, Orlen decided to cancel the contracts, the manager said.
In late February, when new management of OTC was appointed following a change at the helm of its parent, the demurrage bill for the six tankers amounted to $30 million, the person said.
OTC is now being audited. Prosecutors are probing former management activities linked to the oversight of the trading unit.
In two other probes, prosecutors are examining whether the company under the helm of former CEO Daniel Obajtek artificially lowered prices ahead of a 2023 election and sold assets at below fair value.
Orlen wrote down 1.6 billion zloty ($394 million) from the value of OTS this month saying it had prepaid purchases of oil and refining products but did not receive the products by the agreed deadline. It assessed the reimbursement of the prepayments as unlikely.
The refiner posted a 2023 profit of 27.55 billion zlotys.
The largest beneficiary, a Dubai based intermediary run by a Chinese citizen, received over $200 million in prepayments, the manager said, without providing further detail.
Contrary to standards, the advance payments were paid without collateral to entities with which Orlen had never cooperated before, the company said on April 11.
OTS was set up in Zug, Switzerland, in 2022 ahead of the European Union ban on imports of Russian oil products which came into force in early 2023.