The Dutch Caribbean island of Aruba is offering to lease oil storage after terminating an ill-fated refining project with PdV Holding (PDVH), the opposition-controlled US subsidiary of Venezuela’s national oil company PdV.
The lease offer comes at a time of severe tightness in onshore and
floating oil storage owing to a historic supply glut and a collapse in
demand caused by the Covid-19 pandemic.
Aruba has 10 available storage tanks with capacity for 665,000 bl of
clean products, 5.224mn bl of crude and 518,000 bl of naphtha, according
to promotional material obtained by Argus. Another seven tanks
currently awaiting repairs have capacity for 4.224mn bl of crude.
Aruba’s prime minister Evelyn Wever-Croes noted strong interest in
the storage lease. “It will take us at least a month to get the best
offer for Aruba, do the inspections of the tanks and start sending crude
so we can receive the lease payment, which is being estimated to net at
least 5mn florins ($2.8mn per month).”
The storage became available after Delaware-based PDVH signed an
agreement with the government of Aruba and Refineria di Aruba (RdA) that
puts a definitive end to a $1.1bn refinery project spearheaded by PdV
in Caracas in 2016 and inherited by Venezuela’s political opposition
last year when it took over PdV’s US assets.
After the long-term lease was signed in 2016, the project manager,
Houston-based Citgo Petroleum, conducted preliminary work to refurbish
Valero’s former 235,000 b/d San Nicolas refinery into a heavy crude
upgrader. In addition to logistical advantages for PdV, the Aruba
project would have helped to absorb Venezuelan crude production that
could no longer be processed at mostly inoperable upgraders at PdV’s
Jose complex in Venezuela.
PDVH and the government of Aruba and RdA started negotiations in
April 2019 to end the project. A memorandum of understanding that
suspended the project and laid the groundwork for an operational
transition was signed in October 2019. On 28 February 2020, PDVH through
its subsidiary Citgo Aruba Holding (CAH) signed a transfer of
operatorship agreement with RdA. The withdrawal included labor severance
packages.
Tax Obligation
Under the new agreement that received final signatures on 1 May, PDVH
agreed to pay $17mn in back taxes to Aruba. The funds already earmarked
to comply with the tax obligation will come from PDVH, the holding
company told Argus.
The “amicable” agreement “will potentially save PDV Holding’s
shareholder up to US$150 million” and does not impact Citgo Petroleum’s
fuel supply contracts with Fuels Marketing and Supply Aruba, and with
Queen Beatrix International Airport for jet fuel, PDVH said. The firm
added it will continue to cooperate “with investigations into
irregularities in the Aruba Project under the prior management’s
control.”
For Aruba, the termination agreement marks the end of “long and
intense” negotiations. “There were times that we thought that we would
not be able to finalize this because of the unstable situation in
Venezuela,” Wever-Croes said after the signing last week.
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