Citgo's Aruba refinery insulated from Crystallex lien

US refiner Citgo's long-term lease on an Aruban refinery and storage terminal is unaffected by a US court ruling that is poised to strip Venezuelan state-owned PdV of its US downstream assets.

A US federal judge late yesterday cleared the way for Canadian mining company Crystallex International to sell the shares of PdV Holding (PDVH), the indirect parent of Citgo Petroleum, which has 750,000 b/d of US refining capacity and extensive midstream infrastructure.

The writ of attachment issued by Judge Leonard Stark of the US District Court of Delaware ordered US marshals to start the process of selling PDVH shares at auction. Stark imposed a temporary stay on Crystallex to give Venezuela an opportunity to appeal. PdV has vowed to appeal, and a Venezuelan official has signaled a possible settlement.

PDVH also owns Citgo Aruba Refining (CAR), which operates the idle Aruba refinery and storage terminal. But the US court judgment is not recognized in the Dutch Caribbean jurisdiction, meaning Crystallex would have to pursue a separate local court review and recognition of the procedure if it wants to include the lease, two lawyers familiar with the case told Argus.

Under the lease with the Aruban government that started in October 2016, Citgo plans to restart the 280,000 b/d refinery by the second half of 2018. Citgo puts the refinery's capacity at 209,000 b/d. The project is designed to allow the refinery to process extra-heavy crude from Venezuela's Orinoco oil belt into intermediate crude that would then be sent to Citgo US refining network for further processing. Naphtha would be sold to PdV for use as diluent to transport the 8°-10°API Orinoco crude.

While the project is underway, Citgo has been using the Aruba facility for storage and transshipment of Venezuelan oil.

The refinery project recently stalled because of the effect of separate debt-related attachments levied by US independent ConocoPhillips on PdV's Dutch Caribbean assets in May. These are in the process of being lifted following a $2bn settlement with PdV.

Representatives of the Aruban government could not be reached for comment.

According to a statement issued this morning by the office of Venezuelan executive vice president Delcy Rodriguez, Venezuelan energy minister and PdV chief executive Manuel Quevedo is in Aruba to "inspect" the refinery project. He is accompanied by Citgo chief executive Asdrubal Chavez and Venezuela's local consul Carlos Mata Figueroa. The delegation met with prime minister Evelyn Wever-Croes and refinery workers, and discussed a possible gas pipeline from Venezuela to Aruba, according to the statement.

The Aruba refinery, in San Nicolas, had been owned by US refiner Valero, which closed the facility in 2012 because it was no longer economically viable. The Citgo lease, signed in Caracas in June 2016, is for a 15-year period with a possible 10-year extension. The project cost was estimated at the time at $450mn-650mn.