Carib, Central America refiners disengage from PdV
OREANDA-NEWS. February 16, 2016. Caribbean and Central American governments are trying to shake off once-vaunted refining ties with Venezuela's financially struggling state-run PdV, but they face an uphill battle to win over alternative investors.
Under late former Venezuelan president Hugo Chavez, PdV forged downstream partnerships across the region, promising to plow in petrodollars to upgrade and build refineries as part of a campaign of oil diplomacy. Even before oil prices started tumbling in mid-2014, PdV had followed through with none of the overseas projects, even as a lack of investment eroded its own operational refining capacity at home.
Venezuelan officials now say their government cannot afford to meet these regional refinery commitments.
For Venezuela?s small neighbors, the dashed downstream plans signal prolonged dependence on imports of refined products. Part of these imports has traditionally come from Venezuela itself, but that supply is no longer seen as sustainable.
Dutch-controlled Curacao, just off Venezuela?s western Caribbean coast, will not renew PdV?s lease of the 320,000 b/d Isla refinery that expires in 2019, the island's prime minister Bernard Whiteman says.
Curacao is seeking an investor to help it upgrade the 98-year-old facility. "Our efforts so far have been troubled by the terms of our lease agreement with PdV," an official of Curacao's environment ministry told Argus. "If PdV wants a new lease, the terms must be changed significantly to encourage the investors we are speaking with." A new investor would have a 49pc stake in the refinery with Curacao retaining 51pc.
Chinese state-run engineering firm CMEC and the Isla management said in May 2015 they were discussing an upgrade of some of the refinery's units.
The terms of the current lease agreement, and the aspired terms, "cannot be divulged as this would compromise our negotiating position," the official said.
Upgrading the plant would require overhauling its emissions controls to address longstanding environmental concerns.
In Jamaica, the government is seeking investors for the 35,000 b/d Petrojam refinery after PdV failed to deliver on decade-old promises to expand the plant to 50,000 b/d.
Jamaican state-owned PCJ holds 51pc of PetroJam, while PdV has 49pc.
The government has hinted that the refinery may need to shut down if nothing is done.
Similarly, the Dominican Republic has lost hope that PdV will fulfill a plan to expand the Refidomsa refinery from 34,000 b/d to 60,000 b/d, an energy ministry official there says.
The Dominican Republic retained 51pc of Refidomsa when it sold a 49pc share to PdV in 2010.
"We have had some indications of interest from prospective partners, but nothing is yet close to being concrete," the official said.
Nicaragua is seeking alternative sources of financing to build the greenfield 150,000 b/d Supreme Dream of Bol?var refinery that PdV had undertaken to fund, "but has not been able to do because of the fall in oil prices," a Nicaraguan official told Argus.
PdV is also a 50:50 partner with Cuba's state-owned Cupet in CuvenPetrol that has been trying to expand refining capacity in Cuba from about 110,000 b/d to 350,000 b/d.
The plans include upgrading the 65,000 b/d Cienfuegos refinery to 150,000 b/d, and the construction of a 150,000 b/d refinery at Matanzas on the northern coast.
These projects were announced in 2010, but neither has started.
PdV "has not pulled out" of these ventures that are awaiting the "appropriate environment and conditions" for them to be implemented, a Cupet official told Argus in December.
The distancing of PdV from regional refinery projects coincides with an evaporation of Venezuelan loans to signatories of Caracas? preferential oil supply facility PetroCaribe. Venezuelan supply under the decade-old program has also diminished.
PetroCaribe member countries purchase crude and products from Venezuela, but are allowed to keep a part of the cost as a long-term, low interest loan.
The PetroCaribe formula requires members to pay 40pc of the oil cost upfront when the price is above \\$100/bl. This rises to 50pc upfront when oil prices are \\$80-100/bl, and 60pc at \\$50-80/bl, a Jamaican energy minister official tells Argus. Full payment kicks in only if the oil price falls below \\$15/bl.
"We – and other importers under PetroCaribe terms – are paying less now, but are retaining less as loans," the Jamaican official said.