Caracas, 26 October (Argus) — Venezuela's PdV is pondering its options following a Swiss trading company's offer to buy the Curacao-based Isla refinery, which the state-run oil company has been leasing since 1985.
Venezuelan energy ministry officials acknowledged today that recent elections in Willemstad, coupled with Swiss firm Link Oil Trading's $1.5bn offer to buy 100pc control of the Isla refinery from Curacao's government and spend $1.5bn more to upgrade its crude processing plants, could compel PdV to start reviewing whether, and how, the refinery fits into the company's downstream operations.
Up to now, PdV has brushed aside years of diplomatic pleas and court orders by Curacao's authorities to upgrade the 335,000 b/d refinery and clean up environmental damage that many islanders blame on insufficient maintenance.
If a tentative agreement eventually is reached during talks between Curacao's government and Link Oil Trading, which are scheduled to start before the end of 2012, PdV's options would include making a counterbid, seeking a joint venture deal with Link Oil, or walking away from any operational or stakeholding role in the refinery before its lease expires in seven years.
PdV does not have the capital to top a $3bn counterbid, but it does have crude supplies that Link Oil would be interested in accessing.
The least palatable option for PdV would be to walk away from the refinery ahead of its plan to double Venezuela's Orinoco extra-heavy crude production capacity to 6mn b/d by 2019 and expand domestic refining capacity.
PdV “needs Isla refinery at least” until its Orinoco projects reach peak capacity in 2019, the officials said.
Energy minister Rafael Ramirez has said Isla is important to PdV's global downstream operations and in 2010 he asserted that PdV would renegotiate and extend its long-term lease “well before” the 2019 expiration date. To date, PdV has taken no action to start talks with Willemstad.
Isla's 335,000 b/ nameplate crude processing capacity is equivalent to 25pc of PdV's total Venezuelan-based refining capacity of 1.31mn b/d. PdV has been able to compensate somewhat for its downstream problems in Venezuela with its operations at the Curacao facility.
The refinery's crude and products storage facilities and deep water jetties in Curacao's Schottegat harbor also give PdV more capacity to load very large crude carriers (VLCCs) bound for China and other Asian ports. But PdV's official capital spending plans appear to belie Ramirez's assurances that the refinery is important to the company's downstream operations.
PdV is a stakeholder and major financier in plans to build or expand refineries with a combined capacity of over 1.9mn b/d in Cuba, Jamaica, Nicaragua, Ecuador, Brazil, Syria, Vietnam and China over the coming decade. But PdV's plans do not explicitly earmark any funds for Isla upgrades.
Curacao's authorities have expressed interest in Link Oil's $3bn offer to buy the refinery, which also includes buying out the remaining seven years on PdV's lease. Helmin Wiels, leader of the winning Sovereign People (PS) party in the island's recent elections, this week urged PdV to spend at least $1.5bn to upgrade the refinery and extend its operational life.
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