(Adds details on contracts, refinery output)
HOUSTON, June 13 (Reuters) - Venezuela is considering refining foreign crude for the first time to produce fuels, according to internal documents seen by Reuters, the latest sign of the country's strain to meet its obligations despite having the world's largest crude reserves.
State-run oil company PDVSA has drawn up a plan to process up to 57,000 barrels per day (bpd) of foreign crude in June at the country's largest refinery. The fuels produced would fulfill export contracts largely to Russian and Chinese customers and reduce purchases of fuels for domestic use, the documents seen on Wednesday showed.
The oil company has been falling short of fuel exports in recent years due to a lack of lighter crudes to refine, spare parts, poor maintenance and management upheaval at its 1.3 million-barrel-per-day (bpd) domestic refining network. PDVSA also lost access in May to inventories produced in Curacao, where it operates the 335,000-bpd Isla refinery.
The country's falling oil production and exports have led to a severe economic recession, a loss of skilled workers, and widespread food and medicine shortages, hampering efforts to turnaround PDVSA. Some energy experts say further declines could contribute to a global crude shortfall.
U.S.-based ConocoPhillips last month seized some of PDVSA's assets in the Caribbean seeking payment for a $2 billion arbitration award, and reducing PDVSA's ability to deliver fuel and crude exports to Asian customers and regional allies.
PDVSA did not respond to a request for comment.
The OPEC member country had never before imported foreign crude for its domestic refineries, although it has mixed African, Russian and U.S. crudes needed to blend with its extra heavy oil to make exportable products. It also has purchased foreign oil for Caribbean refineries and to supply allies, including Cuba.
In May, the country produced 1.53 million bpd of crude, according to numbers delivered to OPEC, but other sources put the figure at 1.39 million bpd, which would be the lowest monthly output since the 1950s.
If PDVSA chooses to run the imported crude, one of two scenarios outlined in the planning documents, the imports would alleviate a lack of domestic lighter crudes needed at the refineries, which have been running at about a third of their capacity. It could use Russia's Urals, Iranian Light or Angola's Girassol, according to the documents.
"The larger processing of crude would increase our fuel availability. It would also decrease the requirements (to import) of vacuum gasoil and diesel," one of the documents said.
The alternative, not using imported crude, would mean the shortfall in fuel contracts would increase, the document showed. Most of these fuel contracts cover oil-for-loans with Chinese and Russian companies.
As of June 13, two tankers holding Urals crude were waiting in Venezuelan waters to discharge, according to Thomson Reuters vessel tracking data. One of the two, the Advantage Atom, is waiting near its Amuay refinery.
Venezuela in January started routine imports of Urals crude to supply Cuban refineries, spending nearly $440 million on the purchases for its Socialist ally.
The Urals cargoes had been discharged in Curacao for transfer to Cuba, but since Conoco began seizing PDVSA's Caribbean assets, tankers arriving from Russia have been diverted to Venezuela's Paraguana Refining Center (CRP), which includes its Amuay and Cardon refineries.
NOT ENOUGH FOR ALL
To meet its domestic demands and PDVSA's fuel supply contracts, Venezuela would have to produce some 850,000 bpd of fuels, the documents show.
Neither of the June alternatives show it getting close to that level. If PDVSA decides to process the foreign crude, it would produce 606,000 bpd, and less if it does not.
From January through March, PDVSA's refineries supplied 78 percent of the 365,000 bpd of the fuels demanded by Venezuela's domestic market, which forced the company to import finished products including gasoline and diesel.
Under the plan excluding foreign oil, PDVSA's domestic refineries this month would work at about 36 percent of their total capacity, or 473,000 bpd of Venezuelan crude, according to the documents, reflecting an acute lack of spare parts and delayed maintenance projects.
On Wednesday, PDVSA's 310,000-bpd Cardon refinery on restarted a vacuum distillation unit that was waiting for spare parts to be repaired. Last week, the 645,000-Amuay refinery restarted one of its crude distillation units.
Those repairs are just some of the many still pending, according to the documents. At Venezuela's smallest refineries, Puerto la Cruz and El Palito, the lack of medium and light crudes has kept several distillation units out of service for months.
The insufficient fuel production is affecting China's CNPC and its subsidiaries the most as PDVSA would have to ship 258,000 bpd of fuel oil and jet fuel to these companies for repaying Chinese loans extended to the Venezuelan government in the last decade, but it typically delivers less than 100,000 bpd.
Russia's Rosneft this month is entitled to 80,000 bpd of fuel oil, jet fuel and natural gasoline under oil-for-loan contracts, while Cuba and members of Petrocaribe should receive at least 108,000 bpd, according to current contracts. (Reporting by Marianna Parraga, editing by G Crosse and Diane Craft)