Published On: Wed, Dec 19th, 2018

PDVSA seeks to restart refinery before the end of its lease

pdvsaWILLEMSTAD - Petróleos de Venezuela SA is trying to restart the refiner and operate it for a final year before the lease expires and is transferred to another operator, probably to Motiva Enterprises LLC, owned by Saudi Aramco.

The refinery and its terminal, which were once key to Venezuela's strategy to increase oil production to 6 million barrels per day, have worked intermittently over the past year. The refinery has been affected by a shortage of Venezuelan crude oil, lack of power, breakdowns, and lawsuits by creditors - especially ConocoPhillips, based in Houston - which sought their payments with the embargo on oil shipments.

The imminent departure of PDVSA puts a bleak end to a three-decade relationship between Curaçao and the Venezuelan oil company. In the 1980s, PDVSA rescued the refinery after Royal Dutch Shell reported that it was no longer profitable to operate it.

At a time when it faces economic collapse and possible US sanctions, Venezuela's state oil company is losing its once influential position in the Caribbean. The measure would help state-owned Aramco, officially called Saudi Arabian Oil Co., achieve its goal of diversifying crude sales amid fluctuating energy markets. The company expects to hold stakes in refining assets with a combined daily capacity of 8 million to 10 million barrels by 2028, chief executive Amin Nasser said on December 11.

Now that the impetus of the Isla refinery has been reactivated, the plan is to resume the installation with a capacity of 320,000 barrels per day already in January, said Marcelino de Lannoy, interim director of Refineria di Korsou, owner of the refinery leased by PDVSA.

The island refinery commissioned a century ago, represents approximately 13 percent of PDVSA's global capacity to process crude. Venezuela leased the refinery in 1985 because it needed an outlet for its growing production. Now, after almost two decades of the socialist regimes of the late President Hugo Chávez and his successor Nicolás Maduro, oil production has fallen to its lowest levels since the 1940s. The country, owner of the largest oil reserves of the world, it barely produces enough oil to feed its refineries inside Venezuela.

The lease expires in December 2019 and Motiva is the "preferred bidder" to operate the Isla refinery as of 2020. De Lannoy declined to reveal the identity of the preferred bidder but indicated that it is a company with experience in refining operations. A Memorandum of Understanding is in the process and can be signed in January, he said.

The agreement involves not only the refinery but also the Bullen Bay oil terminal, the largest in the Caribbean, with a capacity to store 16.7 million barrels of crude and products. PDVSA uses the terminal to store Venezuelan heavy crude and transfer it from small vessels to larger vessels, which are cheaper for long trips to Asia.

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