PdV plan to lease Aruba refinery facing headwinds
OREANDA-NEWS. August 22, 2016. Venezuela's ambitious plan to lease the idled Aruba oil refinery is running into headwinds.
Venezuelan state-owned PdV's US subsidiary Citgo is bogged down in "protracted" negotiations with US independent refiner Valero, owner of the 235,000 b/d refinery, Aruban officials close to the talks told Argus.
The ongoing negotiations between PdV and Valero concern the "final release of the premises and facilities," the officials say.
The agreement requires approval by the Aruban parliament that had been expected "in a couple of weeks," Aruban officials told Argus on 27 June.
"The intended new target date for parliamentary approval meetings has been announced by the government to be the beginning of September," an Aruban official now says. "But this could be changed to mid-September or to the end of September, or maybe even beginning of October."
Valero has not responded to a request from Argus about the progress of the negotiations.
Citgo and the government of Dutch-controlled Aruba said in June 2016 they had reached an agreement under which the Venezuelan firm would lease the refinery in San Nicolas, and invest \\$450mn-\\$650mn to upgrade it so it could process heavy crude from Venezuela's Orinoco oil belt.
Aruba lies 29km (18mi) off Venezuela's coast.
Under the agreement, Citgo would lease the facility for 15 years, with an option for a 10-year extension. The company would refurbish the plant with a plan to restart refining by mid-2018.
The target date for restarting the plant is still possible, "but the longer it takes Citgo to begin work, the greater the prospects for a delayed start," an Aruban official said.
Valero suspended crude processing at the refinery in March 2012, saying it was uneconomic.
Negotiations between Citgo and the government started in July 2015, after Valero agreed to temporarily suspend the dismantling of the refinery.
When it was in operation, the refinery processed heavy sour crude into distillates and intermediate feedstock. It did not produce finished products.
The refinery site features 63 storage tanks with almost 12mn bl of total storage capacity.
The facility also has two deepwater marine docks capable of receiving ultra-large crude carriers and six refined product docks, as well as a truck rack for local deliveries.
PdV already leases the Isla oil refinery on another nearby Dutch-controlled island, Curacao, but that agreement expires in 2019. The company needs more downstream capacity to process diluted crude from the Orinoco belt.
PdV's domestic infrastructure is limited, and greenfield upgraders and blending projects have proved difficult for the cash-strapped company to develop.
Neither PdV nor Citgo has not commented on the status of the Aruba project.