PdV hopes to retain Curacao terminal, not refinery

Venezuelan state-owned PdV is hoping to retain access to Curacao's Bullen Bay terminal after its lease expires in December 2019, but the associated Isla refinery on the Dutch-controlled island has lost strategic value for the company, Venezuelan officials tell Argus.

The century-old refinery, which has nameplate capacity of 335,000 b/d, barely operated in 2018 because of a lack of feedstock, maintenance and domestic utility services. Normally the facility processed around 220,000 b/d.

A senior Venezuelan energy ministry official said PdV no longer has any commercial or financial interest in the refinery. "Isla has lost its strategic importance as a refining center for PdV," the official said. "PdV can't supply the crude Isla needs, can't afford imported crude from other suppliers and doesn't have the financial resources to maintain the refinery even in nominal operating capacity."

"Bullen Bay is very important to PdV's export logistics, but PdV isn't interested in spending up to $3bn to upgrade the refinery," official added.

Bullen Bay is a critical transshipment hub for PdV's export operations, particularly involving shipments to China, India and close ally Cuba. PdV also leases storage on the other Dutch Caribbean islands of Aruba and St Eustatius, and owns the 10mn bl Bopec storage facility on Bonaire.

The value of the logistical network was highlighted in May, when US independent ConocoPhillips imposed pre-judgment attachments on PdV's Dutch Caribbean assets as a way to force PdV to honor a $2bn arbitration award for the 2007 takeover of the US firm's Venezuelan assets. PdV reached a settlement with ConocoPhillips in August, and has complied with an initial $500mn cash and in-kind payment, the US company confirms. PdV is otherwise in default on billions of dollars in bond, commercial and arbitration debt.

PdV's export operations would be significantly impaired if it loses access to Bullen Bay, according to a company official at the main Venezuelan oil terminal of Jose. PdV lacks sufficient domestic storage and terminal capacity to compensate for a potential loss of access to Curacao, although continued access to Bopec, Aruba and NuStar's St. Eustatius terminal would soften the blow.

Venezuela's current production of just over 1mn b/d and significant oil-backed debt commitments and barter deals leave little room to supply crude to Curacao, the Venezuelan officials say.

Curacao recently selected Saudi Aramco's US refining subsidiary Motiva Enterprises as the preferred bidder to manage and operate the Isla refinery after PdV's long-term lease expires, with a possible "early step-in" to restart the facility that PdV has effectively abandoned.

The island government's refinery owner, RdK, aims to sign a Memorandum of Understanding (MOU) with Motiva in January. Local utility services to the refinery were recently repaired in anticipation of a restart by PdV. For Curacao, some 2,000 local jobs are at stake.

Neither Motiva nor PdV have commented on the planned transition to a new refinery operator, but a senior executive close to the talks confirmed them.

"We are watching and waiting to see if the reported negotiations reach a firm MOU, but these are always complicated with uncertain outcomes," the Venezuelan energy ministry official said.

"Curacao tried and failed to reach a deal with the Chinese over a year ago. The negotiations with Motiva could fail too," the official added, referring to Curacao's aborted deal with China's state-owned Guangdong Zhenrong Energy (GZE) GZE and a related company Baota.