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Citgo asks PDVSA for $100 MM to revive Aruba refinery Citgo asks PDVSA for $100 MM to revive Aruba refinery

(Reuters) Citgo Petroleum, aiming to start a $685 MM renovationproject to revive Aruba's idled refinery, has asked its cash-strapped parent company PDVSA to provide initial funding of $100 MM, according to an internal document seen by Reuters.

The US-based refining firm received approval in June from Aruba's government to refurbish, restart and operate the idle 235 Mbpd refinery and an attached terminal under a 25-year lease contract.

The importance of Aruba as a facility to be used by PDVSA and its subsidiaries has increased in recent weeks since the parent company could be forced out of neighboring Curacao, where it currently operates the 335 Mbpd Isla refinery and a storage and blending terminal.

Aruba and Curacao are strategically located in the middle of the route from Venezuela to the US or Europe, and PDVSA needs facilities in the area to process and store its oil before it is exported.

Citgo, which had planned to start the renovation project in August, has faced delays due to last minute disagreements between the government of Aruba and the facility's previous owner, US Valero Energy, two sources close to the talks said.

Lack of capital has also contributed to the delays. PDVSA has this year focused on paying foreign debt and its PDV Holding unit has not yet transferred the $100 MM loan to Citgo, according to one of the sources. In the meantime, Citgo is trying to raise private financing for the restart.

"We are looking for project or construction financing from any financial entity, major market player or policy-based financial institution," the document, written in August, said.

The company's Citgo Aruba Refining unit expects to receive bids on Thursday for the restoration project, the sources said. The first of two crude units would be restarted in mid-2017.

The whole project would be finished by mid-2018 and turn the crude distillation units into crude upgraders capable of converting 209 Mbpd of Venezuelan diluted crude oil (DCO) into some 90 Mbpd of a medium crude of 22 API degrees of density and 0.98% of sulfur content, the document said.

The upgraded oil will be almost entirely exported to Citgo's refineries in Lake Charles, Louisiana and Corpus Christi, Texas.

Citgo Aruba Refining also expects to produce fuels for the island's domestic market and some 60 Mbpd of naphtha for PDVSA, which uses this product to dilute its extra heavy oil, according to the document.

Citgo expects to sign a new supply contract with PDVSA to lift diluted crude oil at Venezuelan ports. The companies estimate the Aruba refinery will generate a cashflow of some $220 MM per year, the document said.

The transfer of the refinery and its terminal to Citgo was initially planned for early September, but a termination agreement between the government and Valero has taken more time than expected to be finalized, one of the sources said. Aruba's government and Citgo are also waiting for the island's parliament to give final approval to the deal.

"There have been disagreements related to the transfer of the terminal. Aruba also wants to make sure the island will receive enough refined products from the refinery," the source said.

In the meantime, six consortia of private contractors interested in the revamp have formed in recent days, according to the sources.

The consortia include Venezuela's Vepica, Tecnoconsult, Tivenca, Den Spie and Inelectra, Spain's Pentech, France's Technip and Japan's JGC Corporation, which were recently pre-qualified.

Reporting by Marianna Parraga; additional reporting by Erwin Seba and Sailu Urribarri; Editing by Phil Berlowitz and Andrew Hay

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Citgo asks PDVSA for $100 MM to revive Aruba refinery Citgo asks PDVSA for $100 MM to revive Aruba refinery

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