November 30, 2020 [Argus Media] – Curacao severed an oil storage contract with SPS Drilling E&P six weeks after it was signed, underscoring the challenge of monetizing Caribbean assets formerly run by Venezuela’s state-owned PdV.
The 15 September contract with state-owned Curacao Refinery Utilities (CRU) covered 5.8mn bl of storage at the Bullen Bay terminal. In an interview two days later, SPS Drilling E&P chief executive Manuel Chinchilla had told Argus that fuel oil and clean oil products would start arriving in mid-October. The shipments never materialized.
In an internal employee memo shared with Argus, CRU blamed SPS Drilling E&P for failing to comply with the contract in the context of altered market conditions.
“The market for storage and tank facilities was negatively impacted after the signing of the contract with SPS. Notwithstanding various efforts by RdK to hold SPS on their contract, they defaulted on the contract. This development forced RdK to terminate the agreement with SPS,” the memo said.
SPS Drilling E&P did not immediately comment. But a source close to the company said the deal was prematurely terminated by CRU after it declined to upgrade the terminal to facilitate imports from at least two prospective SPS clients.
Bullen Bay and Curacao’s idle 335,000 b/d Isla refinery were operated by PdV under a long-term lease that ended in December 2019. Starting around mid-2019, Curacao has been casting about for new refinery operators as it grapples with residual labor debt and cautiously navigates restrictions associated with US oil and financial sanctions on Venezuela. A preliminary agreement with Germany’s Klesch collapsed earlier this year. In a new tender, Curacao hopes to select a preferred bidder with which to begin negotiations at the end of November or early December.
Aruba, like Curacao, is seeking to monetize its storage tanks and revitalize or repurpose its 235,000 b/d San Nicolas refinery formerly owned by Valero. The dismantled refinery was supposed to have been refurbished by PdV’s US refining arm Citgo under an ill-fated 2016 contract.
A short-lived agreement with distressed-asset specialist Emqore was terminated last month, a senior Aruban government official told Argus.
Curacao and Aruba had been part of PdV’s once-bustling Dutch Caribbean logistical network that also included Bonaire and St Eustatius. The Venezuelan company began retreating from the nearshore assets as it lost production capacity at home and came under US sanctions starting in 2017.
With tourism hit by the Covid-19 pandemic, the islands are now under significant financial duress partially mitigated by Dutch support.
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