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Puerto La Cruz refinery expansion makes a restart

  • Market: Crude oil, Oil products
  • 30/06/14

A group led by South Korean engineering and construction firm Hyundai E&C has won a $3.47bn contract to resume upgrading and expanding Venezuela's Puerto La Cruz refinery, breathing new life into a project halted in late 2012 because of non-payment of construction costs by state-owned oil company PdV.

The new contract is worth almost $500mn more than the deal signed by the same group of contractors — Hyundai E&C, Hyundai Engineering and China's Wilson Engineering — in June 2012. Work is scheduled to be completed in 47 months once construction begins. The final value of the contract will not be set until PdV decides when construction will start. A 47-month contract timeline suggests that it will take until at least mid-2018 to complete the Puerto La Cruz expansion. Hyundai E&C aimed to complete the project as soon as late 2015 when the original contract was awarded. PdV told the contractors that construction would be delayed by one year when work was halted in late 2012.

Puerto La Cruz is located in Anzoategui state, about 250km (155 miles) east of Caracas. PdV plans to expand the plant's processing capacity to 210,000 b/d from 187,000 b/d and upgrade its capability in handling heavy crude, including oil from the Orinoco belt. The project is part of a plan to upgrade four of PdV's five refineries at a cost estimated in 2012 at $10.3bn. PdV aims to equip the plants to process heavy and extra-heavy crude ranging from 22°API to Boscan 10°API.

Venezuela's Futpv oil union has opposed the Puerto La Cruz expansion, saying it poses increased accident risk for the densely populated area surrounding the plant. The union said last August that PdV had at least 330 major accidents over the previous decade, including incidents at Puerto La Cruz and other refineries. A 2012 explosion at PdV's 635,000 b/d Amuay refinery killed 43 people.

The project was the lynchpin of Hyundai E&C's expansion into South America and a breakthrough in its plan to become a bigger builder of refineries. Its downstream business had previously been more focused on building petrochemicals plants. Hyundai E&C has a 72pc stake in the Puerto La Cruz project, while Hyundai Engineering holds 18pc. Wilson Engineering owns the remaining 10pc.

The same group of contractors last year won a $2.31bn contract to build the 40,000 b/d first phase of PdV's planned 100,000 b/d Battle of Santa Ines refinery in Barinas state. Barinas is one of three new refineries that PdV plans to build by the end of 2019. The downstream expansion, which coincides with a push to double Venezuela's crude production to 6mn b/d by 2019, calls for increasing refining capacity to more than 1.8mn b/d from 1.3mn b/d.

tc/rjd

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