Houston: Venezuela’s state oil company Petroleos de Venezuela SA is said to be looking into leasing the Aruba refinery, where it would ship tar-like oil to be upgraded into higher value synthetic crude rather than produce fuels like gasoline.
PDVSA, through its US subsidiary Citgo Petroleum Corp, is in talks with the Aruba government to lease the refinery, according to an Aruba government official who isn’t authorised to speak publicly. The Caracas-based state oil company is studying whether to configure the refinery into an upgrader that processes heavy crude from Venezuela’s Orinoco Belt, according to a person familiar with the developing plan.
The plan is being considered as cash-strapped PDVSA doesn’t have the financial resources to build the oil upgrade’s that it needs to turn its asphalt-like crude into a product that refineries can process. The last upgrade’s were put into operation in the early 2000s. The country owns four of them in partnership with firms like Total SA and Chevron Corp.
“In light of the mounting financial pressure faced by PDVSA, this is an obvious alternative to building their own badly needed upgrading capacity,” Mara Roberts, an analyst with BMI Research in New York, said by email. “Venezuelan crude is not marketable without being upgraded or diluted first. With PDVSA increasingly unable to pay for its own diluent, a less expensive lease could prove to be a more viable option to get their exports to market.”
Negotiations with Citgo are being led by the government of Aruba on behalf of Valero Energy Corp, owner of the refinery, an Aruba government official said. Talks are in the final stages and a lease accord is expected by the end of March, the official said. The refinery has the capacity to process 235,000 barrels a day, according to data compiled by Bloomberg.
Venezuela’s economy depends on PDVSA for almost all of the nation’s exports. National coffers have taken a hit as oil production has fallen amid a dearth of investments and the average selling price for its crude has dropped to the lowest in more than a decade. Output dropped 5.5 per cent in the past five years to 2.48 million barrels daily, data compiled by Bloomberg show.
