The Chinese largely state-owned Guangdong Zhenrong Energy Co (GDZR) has said that it is planning, with support from some of China’s leading energy and financing companies, to invest more than US$5.5bn in upgrading the Isla refinery on Curaçao.
Until recently Venezuela’s state owned oil company PDVSA had planned to renew its lease on the facility, which expires in 2019, and upgrade it, but appears to have been unable to proceed because of the precarious economic situation in the country and in PDVSA.
The decision has strategic implications for Venezuela, as well as for China and the countries of the Caribbean and Central America. The 335,000 barrel-per-day refinery, which is located 31 miles to the northwest of Venezuela, has become central to the nation’s ability to overcome inefficiencies in its own refining facilities and to meet its international commitments.
In recent years, the refinery has been used regularly to make up shortfalls of gasoline and diesel when PDVSA’s own refineries have been unable to operate efficiently or have been shut down through lack of maintenance or spares. It has also been central to the country’s ability to supply oil and oil products under the oil-for-loans financing arrangement arrangements it has with China, or with the Caribbean which benefits from its concessional PetroCaribe provisions.
Venezuela also uses the terminal to store its heavy crude, some of which is shipped from the Isla facility to China and India. Reports in the trade press say that the terminal also receives imported light crude from the US for refining and to dilute Venezuelan heavy crude, and is used to produce naphthenic base oils for shipment through PDVSA joint ventures to Europe.
According to reports from Reuters and in the Curaçao media, discussions between GDZR and Curaçao are presently underway in China, with a visiting delegation from Curaçao and advisers negotiating the detail outlined in a memorandum of understanding signed with GDZR in September. This reportedly involves GDZR leading the modernisation of the refinery, oil terminal and the granting of a 20-year renewable lease from the date when the agreement with PDVSA ends.
The reports suggest that discussions involve the China Construction Bank, China Development Bank, the Industrial and Commercial Bank of China (ICBC) and the Bank of China, which are to provide the bulk of the financing required to upgrade the refinery and build a natural gas terminal.
Reuters said that the project will also involve….
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