September 21, 2020 [Argus] – SPS Drilling E&P plans to start bringing oil products into its newly leased Curacao storage tanks in mid-October, reactivating the Bullen Bay terminal that Venezuelan state-owned PdV operated until December 2019.
The one-year contract, which SPS Drilling E&P signed with Dutch-controlled Curacao’s state-owned utility CRU on 15 September, initially covers 5.8mn bl of storage, the operational portion of the terminal’s 15mn bl of capacity.
SPS Drilling E&P chief executive Manuel Chinchilla told Argus in an interview that the company expects to gradually assume operation of all of the tanks as repairs are conducted.
“Our intention is to recover 70pc to 80pc of the installed capacity of the terminal by the first quarter of next year,” Chinchilla said. “We are organizing for the arrival of the first barrels at the terminal in the middle of next month.”
The storage lease can be renewed, but it is conditioned on the outcome of an ongoing tender to operate the 335,000 b/d Isla refinery that SPS Drilling E&P is also vying for.
“If we don’t obtain the refinery and a third party wins, and the state and the third party don’t want to continue working with us, we have 60 days to end the contract and the winner of the refinery contract would operate the terminal,” said Chinchilla, who is based in London.
Over a dozen firms are competing for the refinery lease. Proposals are due next month.
Chinchilla stressed that no Venezuelan oil will be handled at the terminal, in compliance with US sanctions. The company will notify the US Treasury Department’s Office of Foreign Assets Control (OFAC) of its activities on a monthly basis to ensure transparency, he said.
The incoming clean products and fuel oil will come from the US and Europe, and in some cases, SPS Drilling E&P will market cargoes in conjunction with the title holders and traders.
Under SPS Drilling E&P’s refinery proposal, the company would reactivate viable business lines such as lubricants using cleaner energy sources, Chinchilla said.
The refinery, which was operated by PdV since the mid-1980s, is configured for Venezuelan heavy crude, which is no longer available because of the decline in Venezuelan production and the US sanctions, adding to the operating costs of the facility, he said.
SPS Drilling E&P is active in Mexico and Argentina and has assets in Jordan. The firm has commercial offices in London, Houston, Miami, Mexico and Buenos Aires. Among its investors are Middle East funds, Chinchilla said. The firm recently acquired Weatherford’s Mexico drilling division and has partnerships with Weatherford and Halliburton.
The company’s main operations had been in Venezuela until it withdrew in 2018, leaving behind some $100mn in unpaid debt from PdV. The company’s last operation in Venezuela, where it had close to 800 employees, was a PdV service contract to revive the Urdaneta mature oil field. SPS Drilling E&P had a controversial association with military company Camimpeg, which Chinchilla says was necessary to ensure local security.
“Because of the sanctions, Venezuela’s economic situation and the lack of contract compliance that all of the sector’s companies are experiencing, we decided to close our Venezuela operations more than two years ago,” he said. “We are a solid company. We are not political.”
In a separate development today, CRU and Curacao’s state-owned refinery company RdK took control of oil stored at the Isla refinery in response to PdV’s unpaid storage fees and labor debts. PdV did not immediately respond to a request for comment. Curacao had been part of the Venezuelan company’s Dutch Caribbean logistical network that also included Aruba, Bonaire and St Eustatius.
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