October 9, 2019 / 2:35 PM / 6 days ago

UPDATE 2-Aruba ends deal with Citgo to overhaul, operate island refinery

(Adds Citgo comment)

Oct 9 (Reuters) - Aruba on Wednesday reached an agreement with U.S. based Citgo Petroleum Corp to end its contract to refurbish and operate the island’s refinery, a statement from the island’s prime minister said.

The Caribbean nation plans to pursue outside candidates to take over the 209,000 barrel per day refinery, said Prime Minister Evelyn Wever-Croes. The refinery has been idled due to U.S. sanctions on Citgo’s parent, Venezuelan state oil firm PDVSA.

“It took a lot of time, a lot of effort and a lot of energy but finally Citgo admitted that it had no ability to comply with the agreements,” Wever-Croes said in a statement.

Citgo said the agreement would allow it to temporarily suspend the contract until “a democratic transition is ongoing in Venezuela.” Oil-storage operations at the San Nicolas site also will be transferred to Aruba, and Citgo “will address its obligations with workers and suppliers” during the hand over, the statement said. A Citgo spokesperson declined further comment.

Citgo and Aruba in 2016 agreed to a 25-year contract to refurbish and reopen the facility, which had been idled since 2012 after its former operator, U.S.-based Valero Energy Corp , abandoned it due to weak profits.

The plant’s $685 million overhaul, which had received initial funding from Citgo and PDVSA, had made little progress since the United States two years ago issued a first round of sanctions on the Venezuelan state oil company. Earlier this year, another round of U.S. sanctions left the refinery without access to credit.

Reporting by Sailu Urribarri; writing by Gary McWilliams, Editing by Bernadette Baum & Shri Navaratnam

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