Curacao in Talks with GZE


Curacao is working to finalize an agreement for a 40-year lease of its Isla refinery to Chinese oil trader Guangdong Zhenrong Energy. According to a preliminary agreement reached last year, the deal would require GZE to invest $10 billion to upgrade the facility, which includes Latin Americas second-largest base oil plant.

An official at Refineria di Korsou, the government entity owning the refinery, confirmed in late May that negotiations with GZE are still under way. In December Reuters reported that the sides had agreed on outlines for a 40-year lease but it gave GZE until April to submit a plan for $5.5 billion in upgrades to be made by 2020.

According to news reports, the December agreement set an April deadline for negotiations but included provisions for a two-month extension. Several news organizations have reported that a deal would have to be finished by the end of this month so that Curacao could give necessary notice that it does not intend to renew its existing lease with PDVSA, Venezuelas national oil company.

That lease expires in 2019 and requires either party to give two years notice of intent not to renew. Officials at Refineria di Korsou and PDVSA referred questions about those provisions to GZE, which declined to comment citing a confidentiality agreement.

The refinery, located in Curacaos capital city of Willemstad, has capacity of 335,000 barrels per day. Its base oil plant is one of the few in the world that produces both paraffinic and naphthenic base stocks. It has capacity to make 5,000 b/d of the former and 3,700 b/d of the latter, making it the second-biggest base oil plant in South and Central America and the Caribbean, behind Petrobras plant in Duque de Caxias, Brazil.

Officials in Curacao, an island nearly 70 kilometers north of Venezuela, have said they were looking for a new lessor after failing for years to reach an agreement with PDVSA to upgrade the refinery. The cash-strapped oil company has leased the 99-year-old refinery since Shell conveyed it to the government in 1985. In 1994 the parties extended the lease through Dec. 31, 2019.

Curacao is an island located nearly 700 kilometers north of Venezuela in the Southern Caribbean and is a constituent country of the Netherlands. The refinery has been a crude oil outlet for PDVSA and currently runs light and heavy Venezuelan crude.

Nynas currently has a contract with PDVSA to market the naphthenic base oils produced by the plant, but the Stockholm, Sweden-based company said it has not confirmed any discussions on the lease change. Nynas, a 50-50 joint venture between PDVSA and Finlands Neste, is open to continuing a marketing agreement with a new operator and supports any investments in the facility, Nynas Communications Director Hans stlin told Lube Report. But Ostlin also implied that Nynas, one of the worlds two largest naphthenic base oil marketers, would not be in a bind if it lost access to Curacaos pale oils.

Nynas has several supply points for naphthenic specialty oils, with the Isla refinery representing just one, Ostlin said yesterday. With the recent expansion of our own production capacity, following the acquisition of the Hamburg refinery in Germany, Nynas supply security has been strengthened significantly.

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