US sanctions pull plug on Citgo Aruba project

A $1.1bn Venezuelan project to refurbish a mothballed refinery on the Dutch-controlled island of Aruba has derailed because of US sanctions on national oil company PdV.

PdV's US refining unit Citgo can still use the storage terminal, however, so long as the crude does not belong to PdV. Citgo signed a 15-year lease for Valero´s former 235,000 b/d refinery and terminal in 2016 with a plan to transform the refinery into a heavy crude upgrader.

The upgrader project had already been lagging timelines and funding targets, causing considerable frustration in the government of the tiny island that is better known for its beaches than its refinery.

Citgo Aruba today laid off 100 of around 250 contract employees in the project, because the sanctions prohibit funding of parent company Citgo Aruba Holding, according to a source close to the island´s government.

If by the end of March the funding is still blocked, the Citgo refinery and terminal units will need to reduce their workforce from 142 to 85 people, and the number of contracted employees will fall from 120 to 70, according to an internal memorandum obtained by Argus.

Phase 2 of the project, involving detailed inspection of the aging infrastructure, got underway in September 2018 and is now stopped. The final refurbishment phase was supposed to kick off in the second quarter of 2019.

Before the US imposed the oil sanctions on 28 January, Citgo had been regularly using Aruba as a terminal, routinely unloading Venezuelan diluted crude oil (DCO) and other grades into storage tanks to allow it to settle and drain out excess water before reloading it for export to the US and Asia. But PdV´s crude production and exports are falling in response to the sanctions, which have effectively cut off the US market and are discouraging some non-US buyers to look elsewhere.

The US sanctions are aimed at unseating Nicolas Maduro, whom the US, Canada and most EU and Latin American countries no longer recognize as president. The emerging administration of self-proclaimed acting president Juan Guaidó yesterday named a new board of Citgo in a bid to block the asset´s takeover from Venezuela´s multiple creditors.

source: Argus Media