(Adds details on refinery operations, context)
By Marianna Parraga
May 11 (Reuters) - Venezuela's PDVSA has halted crude deliveries to a Caribbean refinery ahead of a planned shutdown and changed some trade terms as it moves to protect its oil exports from seizures in a bruising legal dispute with U.S.-based ConocoPhillips, sources with knowledge of the moves said on Friday.
Conoco last week began legal actions in the Caribbean to enforce a $2 billion arbitration award by the International Chamber of Commerce (ICC) over the 2007 nationalization of its projects in Venezuela. The moves have disrupted fuel deliveries throughout the Caribbean, much of which is dependent on PDVSA supplies.
PDVSA plans to let its 335,000 barrel-per-day leased refinery in Curacao halt operations once crude inventories are exhausted because no new shipments are headed to the Caribbean, the sources said.
The refinery, which was getting ready to restart several units this month after a lengthy maintenance project, will retain fuel produced. PDVSA transferred custody over the inventories to the facility, owned by the Curacao government, the sources said.
Separately, ownership of crude to be refined at Isla in Curacao was transferred by PDVSA to its U.S. unit, Citgo Petroleum, in an attempt to avoid potential seizures by Conoco, one of the sources added.
"The seizure in Curacao was enforced on Thursday, so the inventories' custody was transferred. The refinery will eventually stop (operations)," the source said.
Conoco's actions continue to force PDVSA, which was already struggling to export its oil amid falling output and a lack of maintenance, to change its trade arrangements to avoid further seizures of physical assets, tankers or the barrels aboard.
The company is now selling all its oil for export under FOB (free on board) terms, meaning the barrels have to be delivered to buyers in Venezuelan waters.
Conoco said on Friday that it had been in touch with local officials "to address issues that may arise as a result of enforcement actions."
PDVSA did not reply to a request for comment.
Curacao fuel distributor, Curoil, told Reuters on Friday the company has "diversified" its fuel supply, so it does not foresee any issues at the moment. The island's Prime Minister Eugene Rhuggenaath earlier this week said Curacao would import fuel if the refinery is paralyzed.
In Bonaire, another of the islands affected by Conoco's actions, there is enough fuel to continue generating electricity for at least two weeks, said Caspar Itz, a spokesman for the Dutch Ministry of Economic Affairs.
PDVSA last year shipped from the terminals it owns and rents in Curacao, Bonaire and St. Eustatius 24 percent of its total exports, or about 400,000 barrels per day (bpd). Facilities in Curacao are crucial for loading big vessels bound for China and India, while most of its fuel oil exports are sent from Bonaire.
For May, PDVSA had planned to ship from Curacao 1.45 million barrels (47,000 bpd) of fuels to Haiti, Cuba, El Salvador, Nicaragua, Belize and other smaller Caribbean islands, according to the state-run firm's internal trade documents.
PDVSA also planned to deliver this month over 2.3 million barrels of crude and fuel oil to Citgo and Russia's Rosneft from Curacao and Bonaire, the documents showed.
PDVSA is also looking for a place in Venezuelan waters to start transferring oil from small to larger tankers, which is typically done for large cargoes bound for Asian destinations.
In its first official comments since Conoco's actions started, Venezuela on Thursday suggested it was ready to pay the U.S. oil company. Conoco said it was looking forward to PDVSA's proposals but added that absent any agreement or payment it would continue its enforcement actions.
Reporting by Marianna Parraga; additional reporting by Gary McWilliams. Editing by Chizu Nomiyama and Tom Brown