Venezuelan state-owned PdV's US refining subsidiary Citgo has shelved plans to restart and upgrade Dutch-controlled Aruba's 235,000 b/d refinery, but the firm is actively using the facility for logistics in spite of tensions between Caracas and the Dutch Caribbean.
Citgo "must slow down" the $685mn plan to revamp the refinery because of US financial sanctions on PdV that have blocked access to financing, Citgo refining vice president James Cristman said in a statement issued in Aruba on 20 February.
Citgo has already built a construction workers' camp and is "working hard to find a solution and hopes to fully resume the project in the near future," Cristman added.
Citgo signed a 15-year lease to operate the San Nicolas refinery in June 2016, promising to restart and upgrade the facility to process Orinoco extra-heavy crude.
Former refinery owner Valero sold the money-losing plant to Aruban state-owned RDA after halting operations in 2012 but agreeing to suspend a dismantling process.
Despite Citgo's indefinite pause in the refinery work, Aruba has emerged as a key logistical link for Venezuela, just 29km (18mi) away.
According to Caribbean shipping sources, Citgo often loads Venezuelan diluted heavy crude oil (DCO) and lighter Venezuelan grades such as Corocoro at the Bullen Bay terminal in fellow Dutch-controlled island Curacao. PdV has a separate long-term refinery lease in Curacao that expires at the end of 2019.
From there Citgo ships the crude to Aruba for offshore blending. The DCO is sometimes blended with Pedernales grade or medium blendstock as well. After Aruba, Citgo takes the blended crude to its US refineries in Texas and Louisiana, the shipping sources tell Argus.
Elsewhere in the Dutch Caribbean, PdV owns the Bopec storage terminal in Bonaire and leases storage at NuStar's facility in St Eustatius.
The Aruba project was aimed at bulking up PdV's nearshore logistics on the eve of the December 2019 expiry of its lease on the accident-prone Isla refinery in Curacao. Deteriorated infrastructure in Venezuela itself, and a Dutch threat in December to close Bopec unless PdV makes critical repairs add to Aruba's relevance for PdV. The Venezuelan company is also using its Dutch Caribbean assets to supply crude to the Cienfuegos refinery in Cuba, a close political ally of Caracas.
But the route from Venezuela through the Dutch Caribbean and onward to the US Gulf coast and other destinations, namely China and India, is fraught with risk for PdV because of frequent debt-related detentions of its cargoes or vessels. The Panamanian-flagged Proteo tanker has been detained in Bullen Bay since early January as a result of a preliminary embargo on its cargo of Venezuelan Boscan crude and the ship's bunkers. Another vessel, the Greek-flagged Promitheas carrying Russian Urals, is also on hold but has yet to berth in Curacao.
The detentions, which numbered as many as 15 in Curacao alone last year, might have been a trigger for Venezuela's early January decision to close its borders with the ABC islands — Aruba, Bonaire and Curacao — which Caracas initially attributed to rampant smuggling of Venezuelan goods and resources such as gold, and later blamed on EU sanctions. The borders remain closed, but the Venezuelan oil logistics are carrying on with no noticeable effect.
In Caracas, the energy ministry told Argus the decision to suspend the Aruba refinery project was made jointly by current Citgo chief executive Asdrubal Chavez and its vice president Calixto Ortega in consultation with PdV's board of directors. It added that the project would not restart until US financial sanctions against PdV are lifted.
In Aruba, the new government that took office in November 2017 is skeptical that the refinery project will get off the ground. In its recent economic outlook for 2018, the island's central bank said the reopening of the refinery "remains highly uncertain." Although preliminary work has started on the refinery upgrade planned by Citgo, "the exact timeline for upgrader work-related investments continues to add uncertainty."
The island's government is "working through the venture to determine the way forward as the Citgo officials who initiated the project have either been purged or are otherwise no longer with the company," a local government official told Argus.
When it was in operation, the refinery processed heavy sour crude into distillates and intermediate feedstock. It did not produce finished products.
Citgo has said the refinery work would be done by technical service providers Technip France and Venezuela's Y&V Ingenieria y Construction, and initially projected the refinery would be fully operational by second-half 2018.
"Some people here are saying the project is troubled by the US sanctions on PdV, but this argument cannot be supported," the Aruban official said, noting that the US financial sanctions do not apply to Citgo.
The Aruba 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.
The restarted refinery will account for 15pc of Aruba's GDP, the island's economic affairs minister Richard Arends said in November 2017.
