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PdV offers refinery assets to China, Russia

1 Nov 2017, 1.35 pm GMT

PdV offers refinery assets to China, Russia

Caracas, 1 November (Argus) — Venezuela´s financially struggling state-owned oil company PdV is offering to transfer control of its largest domestic refining complex to oil companies from Russia and China, the Opec country´s largest state creditors, according to oil union and PdV officials consulted by Argus.

The joint venture proposal centers on PdV´s 940,000 b/d CRP complex, once one of the world´s largest and most modern refinery systems. The CRP, located on the Paraguaná Peninsula, consists of the 635,000 b/d Amuay refinery and the 305,000 b/d Cardón refinery, which together are currently processing a third of their combined nameplate capacity, according to a week-old PdV internal report seen by Argus.

Amuay throughput is about 200,000 b/d or 31.4pc of its design capacity, and Cardón is running 110,000 b/d or 36pc of nameplate capacity, the report shows.

Faced with dwindling cash flow and mounting arrears on its dollar-denominated debt, PdV appears to be trying to mortgage assets to stay afloat.

According to FUTPV oil union director Ivan Freites, a frequent government critic, the company is negotiating separate 10-year leases that would transfer operational control of Amuay to Russian state-controlled Rosneft and Cardón to state-owned PetroChina.

The leases would include separate commitments by Rosneft and PetroChina to invest a minimum combined $7bn to upgrade the refineries and associated facilities in stages over roughly five years, Freites said.

Each operating entity would be structured as a joint venture with an unnamed state-owned Venezuelan company, possibly the military´s new oil and mining company Camimpeg.

Rosneft and PetroChina would own 80pc stakes in their respective refinery operating ventures, with the Venezuelan company holding 20pc.

The proposed upgrades would repair or replace broken units and enhance the refineries´ capacity to handle Venezuela´s abundant heavy crude.

Amuay upgrades that Rosneft would finance and execute on a turnkey basis would include the delayed coking and hydrodesulfurization units, alkylation, catalytic cracking and distillation units, and terminal and storage capacity expansions, according to an internal PdV document describing the proposal.

PetroChina's upgrades at Cardón would include the catalytic cracking, alkylation, distillation, hydrodesulfurization units, the refinery's long idle base oils and lubricants complex, and its export terminal, the PdV document adds.

Rosneft declined to immediately comment on the proposal. PetroChina could not be reached.

Beijing is known to be reluctant to deepen its exposure to Venezuela. The government has loaned Caracas more than $50bn in oil-backed loans over the past decade. Moscow has jumped in more recently with separate oil-backed credit, but the government is not known to have the deep pockets of its Chinese counterpart.

It is not clear how attractive the downstream assets are following years of sharp maintenance spending cuts and the exodus of most of PdV´s skilled workers.

PdV did not rebuild storage and terminal infrastructure at the CRP since a lethal 2012 olefins explosion at Amuay killed over 40 people, Freites says.

Even if the downstream proposal gains traction, it would likely run into political interference.

Under Venezuela´s existing 1999 constitution and oil legislation, any joint ventures or asset transfers require the approval of the legislature, a body that was effectively disbanded by Venezuelan president Nicolas Maduro through the 30 July election of a national constituent assembly (ANC). The election and the ANC are widely seen inside and outside Venezuela as illegitimate.

PdV declined to comment officially on the refinery proposals.

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