June 22, 2018 / 4:00 PM / 4 months ago

UPDATE 1-Curacao refinery seeks temporary operator to replace Venezuela's PDVSA -document

(Adds context, details)

By Marianna Parraga

June 22 (Reuters) - The government-owned Isla refinery in Curacao is seeking a company to immediately replace Venezuela’s state-run PDVSA as operator of the 335,000-barrel-per-day facility, which has been largely idled due to a lack of crude shipments to the plant, according to a document seen by Reuters on Friday.

PDVSA, which supplies the bulk of Venezuela’s revenue, is facing an export crisis due to declining crude output and lack of cash for operations. The problems have caused delays in moving 22 million barrels of crude and refined products to customers around the world.

The situation worsened since ConocoPhillips in May obtained court orders and seized some PDVSA inventories, assets and cargoes in the Caribbean to satisfy a $2 billion arbitration award over the 2007 nationalization of the U.S. producer’s projects in Venezuela.

Conoco’s court orders forced PDVSA to halt oil shipments to Curacao, where it operates the Isla refinery and the Bullenbay terminal. It also interrupted most fuel exports from Curacao to customers in the Caribbean, according to internal PDVSA trade reports.

The refinery this week sent letters to oil companies and traders offering operating partnerships both for the short term and under a long-term lease that would begin in January 2020, according to a copy of one letter.

“The rapidly deteriorating situation in Venezuela and financial and operational impediments to PDVSA’s business activities have presented a near term risk to continued operations of the oil facilities by PDVSA on its own,” the document said.

Curacao Minister for Economic Development Steven Martina declined to comment on the proposed terms of the project, but said meetings between the government and the refinery’s management occurred earlier this week.

PDVSA and the refinery did not immediately reply to requests for comments.

Under what the refinery calls “Project Arawak,” companies interested in operating the refinery must send a formal notice of interest to take over the remainder of the current lease period, which expires at the end of 2019, and possibly for a long-term contract.

The Curacao government previously held talks with China’s Guangdong Zhenrong to replace PDVSA as the refinery’s operator, but a deal was never reached even though the trading firm in January asked Baota Petrochemical to join its multi-billion dollar investment planned for the aging facility.

Isla is operating at minimum capacity since PDVSA started major maintenance work in the facility in the first quarter. The refinery was supposed to restart most operational units in early June, but did not due to lack of Venezuelan crude, according to PDVSA’s internal trade documents.

The Venezuelan energy firm in the first half of June exported 765,000 bpd of crude and fuel to customers, 32 percent below May levels, according to the PDVSA documents. (Reporting by Marianna Parraga in Houston, additional reporting by Sailu Urribarri in Jacksonville and Deisy Buitrago in Caracas Editing by Chizu Nomiyama and Phil Berlowitz)

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