Venezuela’s struggling oil company PDVSA plans to resume operations at its Isla refinery on Curacao, a company official who wished to remain unnamed told S&P Global Platts.
The refinery has a nameplate capacity of 335,000 but its actual throughput is a maximum of 270,000-290,000 bpd. It is operated by a local company, Rafineria di Korsou, “under the direction of PDVSA,” according to the company official.
The refinery has suffered its share of the fallout from the U.S. sanctions against Venezuela with scarcity of feedstock forcing all but the suspension of operations. This, in turn, has made the Curacao autonomous government, with which PDVSA has a contract for the operation of the refinery, to look for an alternative operator.
As a result of all this, Isla is facing bankruptcy: "PDVSA will have to make the decision to send some 3 million barrels of crude to generate cash flow to cover expenses from September to December 2019 or send $60 million to honor the contract and avoid claims,” the company official told S&P Global Platts. "If not, Isla will have to declare force majeure and bankruptcy. The refinery is now totally paralyzed. PDVSA promised the reactivation and offered to supply crude in July but through an intermediary."
The Isla refinery received an exemption from the January sanctions the U.S. slapped on Venezuela. Under the exemption, the refinery can continue working with U.S. companies until January 15, 2020 but it has not helped it much, it seems. On top of all its other troubles, it was also targeted by ConocoPhillips in an asset seizure move against PDVSA.
The scenario with PDVSA sending crude for the refinery is the less likely one, as another company official explained. "For PDVSA the refinery has a low priority. Crude production in Venezuela has decreased significantly. In this scenario, sending crude to Curacaco makes no sense, especially when you take in to account that PDVSA cannot sell products from Curacao because of the embargo."
For Curacao, however, the refinery is high priority: it accounts for a tenth of the island’s GDP and a solid portion of its employment.
By Irina Slav for Oilprice.com
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