Fatal Strike: Paladins Mercenary Road

Chapter 803 Black Market Trade
Blood Fox is paying close attention to Mountain Eagle's Venezuelan crude oil purchase plan...

A descendant of an Arctic fox named Ricardo lives in the capital, Caracas. Because he receives a sum of money every year, he was only considered middle class when Venezuela was prosperous, but now he is definitely a member of the wealthy class there.

And coincidentally, this guy also runs an import and export business, but not in the traditional sense; he's involved in smuggling.

His route was from Caracas to Barranquilla in northern Colombia.

Ricardo wasn't familiar with the energy business, but he had connections with people in energy companies.

Bloodfox didn't urge Ricardo at first, but after Mountain Eagle explained the clear profit model, he decisively made a call to Ricardo.

When the old man turned on the speakerphone and spoke to Ricardo in slightly broken Spanish, Mountain Eagle could tell that Ricardo was very enthusiastic and showed great respect for Blood Fox.

Mountain Eagle hasn't spoken Spanish for a while, so his reading and writing skills might not be as good, but his listening and speaking skills are still fine.

Mountain Eagle quickly gleaned some keywords from their conversation: 'black market,' 'Colombia,' 'Guyana,' '15 barrels'...

After a quick conversation with Ricardo, Blood Fox hung up the phone and looked at Mountain Eagle, saying, "I don't know how you plan to buy crude oil from Venezuela. If you go through the Venezuelan state-owned oil company, the price probably won't be much lower than the market price, but it's a different story if you go through the black market..."

This mountain eagle understands...

He had looked up some information and found that Venezuela had been severely impacted by the United States in the past two years. Due to issues with crude oil sales, crude oil production had decreased by nearly 70%, and due to the cost of extracting heavy crude oil, the people there had been experiencing some hardship in the past two years.

Currently, their crude oil production is only around 260 million barrels per day, but their daily sales are less than 210 million barrels.

Three international companies are now helping Venezuela sell its crude oil. The first is Rosneft, a Russian company, which helps circumvent sanctions by transferring invoices to sell crude oil to the United States.

The second company is Repsol of Spain, which partnered with Venezuela's state-owned oil company to establish an energy company to help them extract oil and committed to importing 300 million barrels of crude oil annually.

The third company is CNPC from Dongda University. They not only acquired a portion of Venezuela's crude oil exports, but also obtained a 40% stake in Block Junin 4, Venezuela's largest oil field, and are assisting them in upgrading their equipment.

The area currently produces 10 barrels of crude oil per day, and is expected to reach a daily production of 25 barrels in the future, with all of the produced crude oil going to the Dongdae market.

However, these three companies cannot support Venezuela's entire market. With shrinking exports, the signing of the Minsk agreements, and OPEC's announcement of increased production, oil prices began to decline significantly in 16. Currently, oil prices are fluctuating around the $50 mark, and there is a possibility of further decline.

Venezuela was already in dire straits at this point...

Crude oil extraction is not like drilling a well on the ground and stopping it whenever you don't need it. Whether you want to increase or decrease production, it's very complicated.

The daily production capacity is already at 260 million barrels, and if the shutdown continues, not only will the Venezuelan government be unable to withstand the pressure, but restarting the facilities in the future will also require a huge amount of funding.

As Mountain Eagle just heard, Ricardo has found out that Venezuela is currently sending 150,000 barrels of crude oil to Colombia and Guyana every day through the black market, but there are still more than 300,000 barrels of crude oil that need to be sold.

Ricardo is considered one of Venezuela's wealthy. His father-in-law works for the state-owned oil company. Although he is just an ordinary employee, he has no problem contacting influential people.

Venezuela is now eager to sell off its surplus crude oil. Compared to crude oil sold through official channels, the crude oil sold on the black market costs only $15 per barrel, but a service fee of one dollar per barrel is charged afterward.

Moreover, there's still room for this price to drop!
Although Venezuela's crude oil export break-even point reaches an astounding $85 due to the added costs of government public service funding and company management...

However, their actual crude oil extraction cost is around $35 per barrel, and the total cost, including taxes and depreciation, is around $45 per barrel.

Since we're going to go through the black market, it'll definitely involve some shady methods. The other party's asking price of $15 a barrel is only reasonable, but it's still not the price that Mountain Eagle is looking for.

Because unsold crude oil will only continue to drive up the costs for Venezuela's state-owned oil company, and for those who dare to participate in black market crude oil trading, that crude oil essentially has no cost.

The key is to sell it!
Moreover, even if the Mountain Eagle wanted to circumvent sanctions by transiting through Mexico, there would be costs involved.

Mexico's oil industry is also state-owned, and control over Mexican crude oil exports to the United States is highly concentrated in Pemex.

Because they enjoy zero-tariff treatment, while other companies that want to circumvent regulations to export oil to the United States have to pay a 3% tax, those private energy companies don't object.

Mountain Eagles did not want to rely entirely on black market transactions to transport crude oil to the United States, because that would be too troublesome and completely inconsistent with the style of the Shadow Fleet.

The so-called "black market trade" that Ricardo mentioned on the phone actually involved transporting crude oil by small boats to Central American countries that were not self-sufficient in oil, selling it to small refineries, also known as illegal refineries, where the refined oil would be sold at 20-30% below market price.

The notorious Mexican gang Los Zetas started by trading crude oil on the black market. They initially stole oil by drilling holes in crude oil pipelines and then sold it to small refineries in the United States by vehicle or small boat.

Later, it evolved into a scheme where, in addition to stealing crude oil themselves, they would also buy stolen crude oil from others at low prices and then smuggle it into the United States using their own smuggling channels. Because it was a business with no initial investment, it was incredibly profitable no matter how they did it!
There's a saying that goes, "Those who live near mountains live off the mountains, and those who live near water live off the water." This kind of thing is not only common in Mexico, but also in the early days of the University of the East.

However, in Mountain Eagle's view, these gangster methods are not particularly applicable to him...

Because he was focused on volume, rather than smuggling in small quantities, a 20,000-ton oil tanker was his ideal minimum standard.

A 20,000-ton oil tanker can carry 150,000 barrels of crude oil. At a price of $15 per barrel, the cost of one shipment of oil is $225 million. Adding transportation costs, which is about $6 per barrel for tanker transportation, the total cost is about $315 million.

If you're selling black market oil, you need to sell it for at least one-third less than the market price.

Based on the current international crude oil price, which is around $45 to $50, the profit for Mountain Eagle is only $15 to $20 per barrel of crude oil.

The best approach would be to partner with an energy company in Mexico, share the profits, use the company's qualifications to pay taxes and change the origin of the crude oil in the tanker, and then directly send the Venezuelan crude oil to the United States. Alternatively, the crude oil could be integrated into Pemex's pipeline and sold through them.

Alternatively, there is an even simpler way: have Anna help register an energy company in Russia, and then, like Rosneft in Russia, go through the formal channels by transferring invoices.

In essence, it involves using the qualifications of Russian energy companies to change the classification of Venezuelan crude oil, helping some countries within the sphere of influence of the United States to circumvent regulations and import Venezuelan crude oil.

Only Russian companies in the whole world dare to do this so blatantly...

However, given the current international oil prices, it would be difficult to make a profit without extremely high sales volume.

If the national oil price were $80 a barrel, the Mountain Eagle would definitely choose to do it without hesitation, but doing so now is not realistic.

His best option is to transit through Mexico...

In theory, no energy company would complain about its oil wells producing too much crude oil every day, as long as it can be sold!
However, all of this comes at a cost. If a foreigner goes searching blindly, no one will pay any attention to him.

So once Bloodfox confirmed that purchasing crude oil from Venezuela was feasible, Thiago became important!

A mob boss with territory in Mexico might not be able to deal with Pemex executives, but convincing the owners of some small energy extraction companies to make money together wouldn't be too difficult.

Due to funding and management issues, the Mexican government encountered bottlenecks in oil extraction, so in 13 it opened up private oil extraction licenses, attracting many energy companies to the industry.

However, extraction costs, fluctuating international oil prices, and Pemex's export monopoly have made life very difficult for these small companies.

If we can dispel some of their concerns, we can persuade them to assist in completing the crude oil re-export trade. We can all make money together.

Once the path is cleared, we can switch to 15-ton or even 30-ton oil tankers to win by sheer volume...

The distance from Venezuela to Houston, USA is less than 2000 nautical miles. This has really opened up a route and can significantly reduce transportation costs.

Blood Fox saw Mountain Eagle deep in thought. Although the old man didn't quite understand why Mountain Eagle was so persistent about this difficult-to-control business, he had one redeeming quality: he respected Mountain Eagle's choices in his career...

While Mountain Eagle was silent, Blood Fox went to the bar, grabbed a bottle of vodka, poured it for everyone, and then got some dried fruit and peanuts that Xiao Wan had brought before they started drinking.

By the time Mountain Eagle snapped out of his reverie, the four old men had already finished a bottle of vodka...

After downing a 1500ml bottle of vodka, 'Eagle Claw' was no longer up to par. The old man, with sleep in his eyes and a flushed face, dragged Blood Fox along, complaining...

“I’m here all for my daughter’s happiness. My life has been meaningless. My wife died young, and I didn’t raise my daughter well. Now I’m just hoping that Lilith will find a good boss and a good husband in the future…”

Camel, sharing the same plight as Eagle Claw, sighed and nodded, saying, "Me too. I feel sad whenever I see Tiffany now. That child has gone astray, and she won't listen to me..."

Mountain Eagle blinked at the old man who was clearly poking at him, and said, spreading his hands, "Let's solve the problem in front of me first..."

If things go smoothly, I'll organize a company team-building event in El Salvador this June, and I'll invite everyone from the Singapore financial office over...

"You two can choose then. If you like them, I'll knock them out and send them to Tiffany and Lilith's room."

'Eagle Claw' paused for a moment, then nodded vigorously and said, "Then it's settled. No need to knock anyone out. I still have some savings. I'll have Lilith dress me up. There are bound to be a few discerning customers..."

As he spoke, Eagle Claw vigorously wiped the boogers from his eyes and said with a slight lisp, "What do you want?"
I don't know anything about selling oil, but I'm a professional at performing surgery and fighting!

(End of this chapter)