Chinese state-owned commodity trader Guangdong Zhenrong Energy expects to assume full operational control of Dutch-controlled Curacao's 335,000 b/d Isla refinery when Venezuelan state-owned PdV's current lease expires at the end of 2019, two Chinese officials in Caracas tell Argus.
Guangdong Zhenrong is currently discussing up to $5.5bn in financing to upgrade Isla and install an LNG terminal with four Chinese financial entities including Bank of China, China Development Bank, ICBC and China Construction Bank, a Chinese oil executive in Caracas said today.
Guangdong Zhenrong has also signed framework cooperation agreements with engineering and construction units of Chinese state-owned oil companies CNPC, Sinopec and CNOOC, the executive said.
PdV currently uses the century-old refinery to blend diluted extra-heavy crude oil from the Orinoco oil belt with imported light crude to produce export-bound 16°API Merey, but the operations appear to be choppy because PdV is unable to make timely cash payments for the waterborne imports. For China, the refinery would allow short-haul processing of Venezuelan crude that it is regularly supplied under extensive oil-backed loans to the Venezuelan government.
Sinopec likely would be contracted to upgrade the ageing refinery's crude processing units and CNOOC would build and operate the planned LNG terminal. CNPC subsidiary China Petroleum Engineering and Construction (CPECC) is the candidate to double Bullen Bay's crude and product storage capacity to 36mn bl, the Chinese oil executive added.
Curacao's government and Guangdong Zhenrong signed a memorandum of understanding (MOU) in September 2016 committing up to $10bn of potential capital expenditures to upgrade the refinery, expand storage facilities and build the gas terminal.
But early engineering and cost projection studies indicate that the entire project including the expanded storage and LNG terminal could be completed for under $6bn, the Chinese executive said.
The MOU signed in September states that Guangdong Zhendong would be granted a 20-year lease to operate a modernized Isla refinery, export terminal and regasification facility.
US consultancy Poten and Partners worked with the Curacao government earlier this year on a request for proposals to install an LNG terminal and transshipment facility at Bullen Bay by 2021.
Beijing is supporting Guangdong Zhenrong's plans for Isla because it will give China "a direct and important presence in a strategic oil region," a local Chinese diplomat told Argus today.
PdV has operated Isla refinery, also called the Di Korsou refinery, since 1985.
The Venezuelan energy ministry said in September that PdV expects to continue operating Isla after its current lease expires at end-2019. The energy ministry also denied reports that PdV will not renew its lease at end-2019, saying it is too early to start lease renewal discussions with Curacao.
But the two Chinese oil and diplomatic officials in Caracas said today that Guangdong Zhendong is expected to take over full operational control of the facility upon the lease's expiry.
The Chinese officials acknowledged that Guangdong Zhendong has no experience operating oil refineries and LNG terminals. But likely Chinese partners Sinopec and CNOOC would be the actual operators, the local Chinese officials added.
