PdV Holding to end Aruba contract by mid-Mar

The opposition-controlled US arm of Venezuelan state-owned PdV struck a deal with Aruba's government to transfer operation of a dormant refining asset inherited from its Caracas-based parent.

Citgo Aruba Holding (CAH), a subsidiary of Delaware-based PdV Holding, reached the transfer agreement with RdA, Dutch-controlled Aruba's owner of the 235,000 b/d San Nicolas plant, which was formally owned and operated by US refiner Valero.

An "amicable" termination agreement will be executed by 16 March, pending approval by Aruba's parliament, CAH said on 29 February.

A senior Aruban government official was more cautious. "This is only the beginning, but it is a start," the official told Argus.

The island's parliament will now move to prepare and pass legislation to enable the termination and finalize outstanding tax payments.

Under a long-term lease signed by late PdV chief executive and former Citgo Petroleum chief executive Nelson Martinez with the Aruban government in 2016, PdV had planned to refurbish the refinery to upgrade Venezuela's extra-heavy Orinoco crude into lighter synthetic oil. The $1.1bn project, which was managed by Houston-based Citgo Petroleum under a service agreement, would have helped to process Venezuelan crude production that exceeds the functioning capacity of upgraders and blending facilities at PdV's Jose complex in Venezuela.

CAH said it has been negotiating with Aruba's government to relinquish the project since April 2019, which is shortly after Venezuela's US-backed political opposition took administrative control of PdV Holding and Citgo Petroleum.

The termination agreement does not impact Citgo Petroleum's fuel supply contracts with Aruba, CAH said.

"PDV Holding and the Government of Aruba look forward to the development of future projects that will benefit the people of Aruba," CAH said.

The Aruba refurbishment project never gained meaningful traction. Amid repeated project delays, Aruba's authorities lacked confidence in Venezuela's ability to execute it. In September 2018, Aruba Prime Minister Evelyn Wever-Croes told Argus that the odds of project execution were "slim".

The project was unpopular with Citgo Petroleum's US management, and it never obtained approval by Venezuela's opposition-controlled National Assembly. PdV blamed the delays on US financial sanctions imposed on Venezuela in August 2017, followed by oil sanctions in January 2019.

Aruba is part of a Dutch Caribbean logistical network that PdV traditionally relied on to get its oil to market. The island remains a frequented transhipment site for cargoes en route to Venezuela on behalf of PdV.

Another Dutch Caribbean island, Curacao, recently ended a lease with PdV to operate its own refinery and terminal.

By Patricia Garip

source: Argus Media