Last Friday, in Caracas, Venezuela, authorities from the governments of Aruba and the Bolivarian Republic of Venezuela, and officials from Petróleos de Venezuela, S.A. (PDVSA) and CITGO Aruba, gathered to witness the execution of a commercial agreement between CITGO Aruba and the Aruban government that will reopen a 209,000 B/D refinery located in San Nicolas, Aruba. In the past, the refinery had processed up to 290,000 barrels a day of crude. The refinery previously employed 700 workers and was operated by Valero Energy Corp.
In attendance at the event were the President of the Bolivarian Republic of Venezuela, Nicolás Maduro; the Venezuelan Minister of Energy and Petroleum, Eulogio del Pino; the Prime Minister of Aruba, Mike Eman; the Aruban Minister of Economy, Communication, Energy and Environment, Mike de Meza; and the President and CEO of CITGO Petroleum Corporation, Nelson P. Martínez.
Following several months of negotiations, officials from the Aruban government and CITGO Aruba, announced plans to reactivate operations, which had been idled since 2012, through a refining facilities 15-year lease agreement, with a 10-year extension option. CITGO Aruba, a group of operating companies under PDV Holding (a PDVSA subsidiary), will operate the facility with CITGO Petroleum Corporation providing services to the group.
"This project will transform the refinery into an upgrader for Venezuelan extra-heavy crude within 18 months to two years. This process - which will require an investment ranging from $450 to $650 million, to be obtained from external financing sources - can be compared to a large turnaround. This is an area in which CITGO is well positioned to provide technical expertise and services," Martínez said, adding that with these changes, the refinery would become a successful economic venture for all parties.
"This has been a very well thought-out process which involved the participation of the best available technical consultants from CITGO and PDVSA, as well as the input of several leading international refining industry consulting firms, such as KBC Advanced Technologies, KBR of Germany and others that assessed the project's technical and financial viability," Martínez added.
Once the adaptation process has concluded, the facility will upgrade extra-heavy crude from the Orinoco Oil Belt, transforming it into intermediate crude, which in turn will be sent on to the CITGO refining network in the United States for further processing, Martínez explained. At the same time, naphtha will be sold to PDVSA for use as diluent for its extra-heavy crude.
A complementary project under consideration would allow the utilization of excess natural gas available in the Paraguaná region of Venezuela. Besides the significant energy cost savings in operations that this would generate, using natural gas would substantially reduce refinery emissions and contribute to environmental protection efforts in the region, the CITGO CEO said, adding that the construction of a gas pipeline linking the coasts of Venezuela and Aruba, which are just 17 miles apart, is being evaluated towards this end.
"This is a very strong project from both the technical and financial perspective. It is a strategic partnership that will benefit CITGO Aruba, PDVSA, Venezuela and Aruba through operations that reduce costs in terms of transportation, energy and storage needs, fully utilize existing infrastructure and maximize the benefit of extra-heavy crude oil production from the Orinoco Oil Belt, the largest oil reservoir in the world," Martínez concluded.
The refinery (also known as the Lago refinery) was commissioned in 1929 by Standard Oil and in 1985, it was shut down by Exxon. In 1990, it was restarted by Coastal Oil, which in 2001, was acquired by El Paso Energy. In 2004, it was purchased by Valero from El Paso Energy. In 2009, the refinery was mothballed for economic reasons. In 2011, Valero restarted the refinery and in 2012, Valero announced it was indefinitely mothballing the refinery and converting it to a terminal and storage facility.
