Published On: Sat, Oct 27th, 2018

Curaçao close to finding strategic partner for refinery

Oil RefineryWILLEMSTAD - The government of Curaçao is close to signing preliminary agreements with at least two US and European companies to resuscitate its 220,000 b/d Isla oil refinery that has been virtually abandoned by the Venezuelan State Oil Company PDVSA. The Venezuelan company is the current operator of the refinery.

According to a representative of the negotiation committee, they expect to sign MOUs with third parties in the next two weeks.

PDVSA’s long-term lease on the refinery expires at the end of 2019, but the distressed state-owned company has not delivered crude to the facility since early 2018, leaving the facility to run intermediate units at best. But PDVSA has restarted storage and transshipment operations at the associated Bullen Bay terminal to reach longer-haul export destinations such as China and India.

Those logistics came to an abrupt halt in May when US independent ConocoPhillips imposed court-ordered liens on PDVSA’s Dutch Caribbean assets as part of a global effort to enforce a $2bn arbitration award. The two companies reached a settlement in August, reopening the critical Dutch Caribbean corridor for Venezuelan oil exports, and ConocoPhillips confirmed yesterday that PDVSA has made an initial settlement payment.

Curaçao is hoping the third parties from the US and Europe will step in with fresh crude supply and short-term operational improvements to get the century-old refinery back on its feet. At stake are some 2,000 local jobs.

But Curaçao will need PDVSA’s cooperation to implement the rescue plan. While technical validation of the third parties will take place directly with Isla, Curacao´s state-owned refinery owner RdK will have to persuade PDVSA in Caracas to sign a commercial agreement for feedstock. The refinery used to regularly process 16°API Merey crude that was blended with light crude, mainly imported from the US.

PDVSA has previously indicated a willingness to deal with a third party at Isla. But the firm would have to rejigger its existing distribution of crude exports to supply it, because its domestic crude production is falling and most of its exports are tied up in oil-backed financial obligations, barter for refined products that it can no longer produce on its own, and off-balance-sheet supply commitments mainly to Cuba.

Curaçao´s agreement with one or more US companies might also require some form of waiver from US financial sanctions on PDVSA and the Venezuelan government.

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