Curacao draws post-PdV refinery map

Dutch-controlled Curacao is scrambling for a lifeline to resuscitate its century-old Isla oil refinery and Bullen Bay terminal that distressed Venezuelan operator PdV has nearly abandoned.

Prime minister Eugene Rhuggenaath — who said he wants citizens to think about the future of the facilities — is hoping that refinery owner RdK will sign up a third party in October under a short-term contract, overlapping with Venezuelan state-controlled PdV's long-term lease that expires in December 2019. As a last resort, the government says it is prepared to run the refinery on its own until a solution is found.

"That is the least-preferred scenario," Rhuggenaath told Argus . Curacao has the skills to operate the facility, but not the capital or crude supply to sustain it, he said.

The nameplate 335,000 b/d refinery at best runs 220,000 b/d but is now barely operating, threatening some 2,000 jobs. Local fuel supply, which a Curacao court ordered PdV to deliver in an 18 May ruling that partially lifted debt-related liens imposed by US independent ConocoPhillips early that month, is not in jeopardy. PdV is providing some of the fuel, mainly gasoline and diesel, but not jet fuel, Rhuggenaath said. Curacao's fuel distributor Curoil is providing what PdV is not, as has long been the case.

But PdV's supply is now coming out of local inventory, and the company is not delivering crude to the refinery to make any more. So PdV's compliance with the court's supply order may not last, risking fines of $1mn/d.

"We are prepared to do everything within our means to ensure local supply of energy. We are looking of course at the legal room that we have in the event that PdV does not comply with the agreements, but as always, we prefer entering into discussions before we go there. In the national interest, we are prepared to take action if necessary," Rhuggenaath said.

Under Curacao's "three-pronged approach" for the Shell-built refinery, a short-term contract would shore up existing operations, repair critical units such as the catalytic cracker, and restore crude supply. A long-term contract, lasting 20-30 years, would encompass broader investment, possibly including an LNG terminal. A redevelopment plan would introduce alternative economic activities such as housing, light industry and tourism on RdK land around the Willemstad refinery site, in conjunction with a shift toward renewable energy.

The short-term contract could last three to five years, and could be merged with the long-term approach. "We have to be flexible, because at the end of the day we want a solution that makes business sense," Rhuggenaath said, highlighting the need to safeguard the integrity of the process after refinery and LNG terminal contracts with Chinese companies were revoked last year.

"We want to keep the politics out as much as possible. And it has to be a commercial solution that gives a fair rate of return," said Rhuggenaath, who was in Bogotá for the inauguration of Colombian president Iván Duque.

Politics will be hard to avoid. At a meeting with RdK in Caracas in early June, PdV "expressed for the first time that they are interested in engaging a third party before the end of 2019. That was not the case before," Rhuggenaath said. But PdV skipped a follow-up meeting that was supposed to happen by 15 June, asserting that it was holding "strategic discussions" on the matter. "We remain open. We are looking at continuity, and the time is short," Rhuggenaath said. The refinery "needs urgent attention".

An RdK delegation made presentations on the short-term opportunity in Houston last week. Since then some 15 companies, including refiners, commodity trading firms and financial entities from multiple countries, have signed non-disclosure agreements, Rhuggenaath said. Information on a long-term plan will be sent out in September.

Rhuggenaath acknowledges that Isla shares the commercial challenges plaguing other Caribbean refineries, but says many companies are eyeing Bullen Bay's storage and distribution value.

US financial sanctions on PdV would dissuade US companies from participating alongside the Venezuelan company before its lease expires. And then there is ConocoPhillips, which still has pre-judgment attachments on most of PdV's Dutch Caribbean assets, including not only the Curacao facilities but also storage in Aruba, Bonaire and St Eustatius to try to enforce a $2bn arbitration award.

Rhuggenaath wants to overcome the immediate crisis to avoid a "fear-based discussion" over the island's economic future. "I am realistic, and I do not want to depend on the refinery in the mid- to long term. Once we have a sense of stability in the short term, in terms of employment, economic contribution, we can have the space to start discussing a future without the refinery, toward renewable energy. We need to have a road map or pathway to explain to the stakeholders how their future would be in this transition."

For now, Curacao's diplomatic relations with Venezuela remain chilly since Caracas unilaterally cut off transportation links in January, alleging that the Dutch Caribbean was not doing enough to tackle contraband. A bilateral technical meeting focused on customs was held in Curacao in May, with a follow-up in Valencia, Venezuela, in June.

A third meeting is supposed to take place in Bonaire in September. Direct flights only resumed yesterday, with an Avior flight from Caracas to the island.

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