Stalled negotiations are once again threatening Refineria di Korsou’s years-long search to find a new operator for the Isla Refinery in Willemstad, Curacao, as a potential buyer has run into obstacles complicating its takeover of the facility.
Refineria di Korsou, the government agency that owns the refinery, had signed a draft deed with a consortium of local businesses – the Curacao Oil Refinery Complex – in May, laying the foundation for the latter to take over. A binding closing agreement was also signed, containing conditions CORC must meet before it operates the facility.
However, a July 22 report from the Curacao Chronicle stated negotiations between the two sides have not gone smoothly. RdK indicated the consortium has yet to comply with certain conditions of the agreement. The consortium has so far not proved it has sufficient funds to restart the refinery, nor has it gained an environmental permit and other permits.
RdK still hopes a deal will be reached before the end of September, and it will continue its search if negotiations fall through. Originally the consortium was to have taken over the refinery by the end of June.
Another report from the Curacao Chronicle, published July 23, indicates the consortium requested an emergency meeting with Curacao’s parliament, saying it has encountered obstacles delaying the start of the takeover, including the loss of a Brazilian investor.
The Chronicle noted the consortium and its directors have not spoken publicly about their challenges. RdK, meanwhile, has grown impatient: Marcelino de Lannoy, director of RdK, said, “Of all the parties and entities involved, RdK is the only one that has to bleed. We pay millions every month to maintain the installations and staff. CORC does not meet the conditions, but it costs them nothing.”
De Lannoy told Lube Report that CORC is still negotiating with the government regarding taxes and permits. “RdK will be awaiting that process since we are not involved with that part. CORC is also obligated to comply with the ‘conditions precedent’ agreed, such as proof of funds and crude diet,” he explained.
Curacao Refinery Utilities, a subsidiary of RdK, announced it would shut down permanently on Sept. 30 as it has operated in the red for a year and a half. The hope is now that a deal will be reached by then so the new operator can offer jobs to the CRU employees as they will otherwise be out of work.
Isla Refinery is a 335,000 barrels per day fuel refinery that had been operated by Venezuelan state-owned Petroleos de Venezuela S.A. since 1985.
The refinery includes a base oil plant with capacity to produce 5,000 b/d of API Group I paraffinic base oils and 3,700 b/d of naphthenic base stocks.
The facility has run intermittently the past couple of years due to PdVSA’s financial problems and its inability to secure crude oil stemming from legal issues and U.S. sanctions. Concerns have been raised that the facility’s lack of activity could lead to permanent damage to its equipment. The refinery is also a vital part of the local economy.
Negotiations between the two sides started at the beginning of the year following a bidding process. CORC is composed of Dick and Doof Contractors B.V., the Petroleum Workers Federation of Curacao and the Association of Employees and Staff of Isla Refinery. Dick and Doof is a Curacao company providing services to the full range of the energy sector and has provided maintenance services at the refinery.
Curacao began its search for a new operator for the facility in 2017, two years before PdVSA’s lease expired at the end of 2019. Chinese energy company Guangdong Zhenrong Energy was first selected for exclusive negotiations, followed by U.S.-based refiner Motiva and then German oil trader Klesch Group. Negotiations with all three companies eventually fell through.