PdV moves forward with Aruba upgrader project

OREANDA-NEWS. June 14, 2016. Venezuela's US refining subsidiary finalized a deal to convert a former Aruban refinery into a heavy crude upgrader over the next two years, the company said over the weekend.

The agreement would add offshore upgrading capacity to bottlenecked Venezuelan facilities over the objections of non-Venezuelan executives in national oil firm PdV's subsidiary, Citgo, and without the support of the country's national assembly.

The refinery today operates as a terminal with 12mn bl of total storage capacity. Upgrades will cost \\$450mn to \\$650mn financed through outside investment, Venezuelan oil firm PdV's subsidiary Citgo said in a statement. Sources close to the deal estimated in May that costs would fall just below \\$1bn.

Terms include a 15-year lease with a ten-year extension option.

PdV subsidiary Citgo Aruba will process Venezuela's very heavy Orinoco crude into an intermediate and produce naphtha to be sold to PdV for use as a heavy crude diluent. Venezuela upgrades Orinoco into a synthetic crude or, increasingly, has blended it with light crude into a 16°API crude called Merey commonly exported to China.

US independent refiner Valero shut the 280,000 b/d refinery in 2012 as cheap natural gas and crude in the US Gulf coast eroded the refinery's competitiveness. Aruba did not produce finished products and relied on costlier power generation at the time.

A project to build natural gas infrastructure, including a pipeline between the Venezuelan and Aruban coasts, was under consideration, the company said. The project would provide a cheaper power supply fed by "excess natural gas" from Venezuela's Paraguana region.

The deal sparked anger in May among non-Venezuelan Citgo executives and lacks the approvals of Venezuela's national assembly required under national law. The agreement could provoke the political opposition that controls the assembly.