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Citgo’s Aruba refinery restart plan pushed back

11 May 2017 16:34 (+01:00 GMT)
Citgo's Aruba refinery restart plan pushed back

Kingston, 11 May (Argus) — The launch of work to revamp Aruba's mothballed 280,000 b/d refinery has been delayed by eight months to July 2017, pushing back a planned restart to 2020 from an original target date of 2018, the Dutch-controlled island's central bank said today.

"The refinery will start operations at two‐thirds capacity in 2020, with transition to full capacity in 2021," the bank said.

US refiner Valero sold the money-losing San Nicolaas facility to Aruban state-run firm RDA after halting operations in 2012 but agreeing to suspend a dismantling process.

In June 2016 RDA leased the refinery for 15 years to Citgo, the US downstream subsidiary of Venezuela´s financially strapped state-owned oil company PdV.

"The projected start of the upgrading in late 2016 could not be met as there are many logistical and financial matters that have to be put in place," an Aruban government official close to the project told Argus today.

Meetings among the central bank, RDA, Citgo and "a third party that will execute the project" concluded that the plan to refurbish the refinery still needs to be completed, the bank said.

The $700mn overhaul of the refinery will be carried out by an engineering consortium of France's Technip and Venezuela contractors Tecnoconsult and Y&V Group, Aruba's government said in January 2017.

"The project cannot start until the financing is in place, and there are still aspects of this that have to be factored," the Aruban official said today. "This includes the additional cost of running the refinery with natural gas that is to be delivered by pipeline from northern Venezuela."

Aruba lies 29km (18mi) off Venezuela's coast.

A senior Venezuelan energy ministry official tells Argus that the Aruba deal is in jeopardy because Citgo cannot raise the capital to pay for it. PdV last year pledged 100pc of Citgo´s equity to bondholders and Russia´s state-controlled Rosneft in separate controversial credit transactions designed to keep the Venezuelan company afloat.

The 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. When it was in operation, the refinery processed heavy sour crude into distillates and intermediate feedstock. It did not produce finished products.

Under PdV's plan, the refinery will be used to upgrade Orinoco extra-heavy crude from Venezuela into intermediate grades that will be shipped to Citgo's US-based refineries in Louisiana and Texas for further processing.

The flow of investment when the rehabilitation of the refinery begins in July will contribute to an anticipated 3.4pc growth in the island's economy for this year, the Aruban central bank said.

But this growth projection "faces significant downside risks, especially due to possible delays in the refinery-related investments," the IMF said in a 31 March review of the island's economy.