Page 5 - LatAmOil Week 18 2020.pdf

LatAmOil COMMENTARY LatAmOil
 According to Argus Media, the offer of access to the island’s only refinery has drawn strong interest. However, Aruba’s Prime Minister Eve- lyn Wever-Croes has said that her government is not rushing to close a deal.
“It will take us at least a month to get the best offer for Aruba, do the inspections of the tanks and start sending crude so we can receive the lease payment, which is being estimated to net at least AWG5mn [$2.8mn per month],” she said.
The prime minister was speaking just days after RdA finalised the termination of its agree- ment with PdV Holding (PDVH), a US-based subsidiary of the Venezuelan NOC PdVSA.That agreement, signed in 2016, allowed PDVH’s sub- sidiary Citgo Aruba Holding (CAH) to assume responsibility for management of the San Nico- las plant over a period of 25 years. It also called for CAH to renovate the refinery, along with its storage, docking and terminal facilities.
Oranjestad had high hopes for the deal, espe- cially since the facility had been idle since 2012, when its previous owner Valero determined that it was no longer economically viable. But CAH was never able to bring the refinery back on stream, especially after the US government imposed new sanctions on Caracas.
Consequently both parties began negoti- ations on the termination of the operatorship agreement in April 2019. They signed a transfer agreement in late February of this year and then finalised the transaction on May 1, when PDVH agreed to pay $17mn in overdue taxes on CAH’s behalf.
Mexico’s production problem
Both of these solutions are innovative, and both are designed to make use of existing but unused capacity. But for Pemex, the move towards using salt caverns, old wells and other sites may not relieve all the pressures of oversupply.
According to the former official quoted by Reuters, the NOC could very well run out of storage capacity within a matter of days. Indus- try analysts concurred with this statement, telling Reuters that Mexico’s remaining avail- able storage facilities were likely to fill up very quickly. Pemex will continue to have more oil than it can handle if it does not slow the pace of production, especially at its mature shallow-wa- ter oilfields, they added.
Similarly, one Pemex worker told Reuters that the situation was critical. “We are running outofstoragespace,”hesaid,notingthattanksat Dos Bocas were more than 40% full.
“What’s next is to shut oilfields,” he added.
At the moment, oil is still flowing from Pemex’s fields despite the drop in demand. But there are no immediate plans for substantial out- put cuts, sources familiar with the matter told Reuters.
According to Gonzalo Monroy, a Mexico City-based industry analyst, the NOC views the storage expansion plan as its best option, since it is not in a position to export its extra barrels. “Pemex is literally storing everywhere it can. It has so far avoided exporting big volumes at
such low prices,” he said to the news agency. “Its best option in the medium term is to store at caverns.”
Aruba as inspiration?
Aruba, by contrast, may reap more benefits from its own storage plan.
That is because the island is not a producer of
oil, it is not under as much pressure as Mexico.
Unlike Pemex, RdA is not looking for a place “ to stash its own excess upstream production.
Instead, it is offering to lease space in its tanks
to outside partners that are desperately trying
to find solutions for the barrels they cannot sell.
This could prove to be a lucrative endeavour for Aruba, given the global shortage of crude storage capacity. It may also be an economical option, given that rising tanker rates have made floating storage aboard oil tankers unaffordable for many traders.
Oranjestad’s plan also has the potential to inspire the operators of other idle refineries in the region. RdA is not the only company that owns a plant that has not processed any crude in years, owing to disputes with Venezuela.
Refineria di Korsou (RdK) is currently at odds with PdVSA over the latter’s failure to sup- ply enough crude to keep its 350,000 bpd plant in Curacao operational. Its refinery has been idle since the beginning of 2019, so its inventories may have room for more oil. Additionally, the company may have even more space following its seizure of Propernyn, a Dutch-registered PdVSA subsidiary that owns the BOPEC ter- minal on the neighbouring island of Bonaire, earlier this year. This facility can handle 10mn barrels of crude oil and petroleum products, and it has been mostly non-operational for the past year.
In theory, RdK could improve its finances by leasing both the refinery tanks and the termi- nal to oil traders sorely in need of extra storage space. Like RdA, though, it is not in a position to take this step immediately. Instead, it must take the time to prepare its facilities. (And in the case of BOPEC, it must also secure the approval of the Dutch Environmental and Transport Inspectorate, known as ILT, which has criticised the terminal for failing to make progress on upgrade projects.). ™
RdA owns Aruba’s only oil refinery (Photo: File)
Aruba is not the only owner of a refinery that has not processed any crude in years, owing to disputes with Venezuela
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