ORANJESTAD — Venezuelan state-owned PdV's US downstream subsidiary Citgo reached a controversial $1bn agreement with the government of Aruba to restart the Aruba refinery under a long-term lease.

 

US refiner Valero mothballed the money-losing 235,000 b/d refinery in March 2012. Since then, the facility has been used as a storage facility.

 

"The agreement is completely formalized," Aruba's energy minister Mike de Mesa said on 13 May.

 

Neither Citgo nor PdV have commented formally on the agreement, which comes amid a deep economic and political crisis in Venezuela.

 

For cash-poor PdV, the refinery offers another potential site for logistics, naphtha production and possibly blending diluted crude from the Orinoco extra-heavy oil belt with imported light crude. The resulting blend, 16°API Merey, is exported to the Asia-Pacific market, mainly China. PdV already leases the Isla refinery on Curacao and leases crude storage elsewhere in the Caribbean.

 

PdV went through Citgo to pursue the Aruba lease because it has no capital or credit to execute it on its own.

 

But the deal has sparked fury among Citgo's senior non-Venezuelan executives, who tell Argus the deal was conducted behind their backs and hurts the company's financial standing.

 

"It was entirely a Venezuelan undertaking and the terms and conditions are opaque, to say the least," a Citgo executive who was not part of the negotiations told Argus.

 

The agreement is certain to set off a reaction among Venezuela's political opposition that controls the national assembly, because the deal was reached without requisite legislative approval.

 

The agreement has to be approved by Aruba's parliament, and this will be done "in a matter of days," an Aruban official close to the negotiations told Argus today.

 

Under the agreement, Citgo will lease the facility for 25 years, and will refurbish it with a plan to restart refining by the middle of 2018, the official said.

 

"We have been told that the rehabilitation of the facility will cost just under $1bn, but the terms of the lease cannot be disclosed at his time," the official said, but added that the terms of the deal are "very good" for Aruba's economy.

 

Negotiations between Citgo and the government started in July 2015, after Valero agreed to temporarily suspend the dismantling of the refinery.

 

Dutch-controlled Aruba lies 29km (18mi) off Venezuela's coast.

 

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.

 

Source: Argus