WILLEMSTAD--Curaçao refinery holding “Refineria di Kòrsou” and the Klesch Group signed an Asset Purchase and Sale Agreement (APSA) whereby the facilities were sold for the symbolic amount of one US dollar.
The remaining documents will be finalised and signed in the coming months. The APSA entails sale of the “Curaçao Oil Facilities” with the land on which they sit given out in long lease.
Klesch will pay US $15 million per year plus indexation for the latter and must contractually invest several hundred million to address the maintenance backlog as well as in upgrades to comply with international environmental standards. The holding will also collect about US $10 million annually in “throughput fees” for storage and transhipment at the accompanying Bullenbaai oil terminal.
The new operator will be using just over two-thirds of the current Isla refinery land. The holding plans to develop the rest for other economic activities.
Government’s mandate had been to secure a long-term operator for Isla and Bullenbaai after the current lease contract with “Petroleos de Venezuela” PDVSA expires at the end of this month. A Project Management Organisation (PMO) was installed and started the process of finding a new operator in February 2019.
The PMO, supported by IHS Markit, issued so-called “teaser letters” to more than 100 potential parties, held management presentations and followed up by issuing process letters. The criteria used to select parties to enter non-binding proposals with had been set beforehand.
Afterwards, Letters of Intent (LOIs) were signed with multiple parties. The Klesch Group was selected from them and signed an exclusivity agreement on September 4, 2019. Subsequently a detailed due diligence process took place.
Now that the APSA has been signed, parties will continue to work to fulfil conditions as agreed, with the aim to sign the two remaining agreements for closure in 2020. This is planned to take place in the second quarter of 2020.
“Refineria di Kòrsou” will take the necessary actions in the meantime to realise a smooth transition to the Klesch Group.
The German refiner and commodities trader also announced a preliminary agreement to operate the island’s 335,000 barrels-per-day refinery and the deep-water terminal. PDVSA agreed earlier this month to continue operating the refinery for at most another year while holding final arrangements with a successor.
A date for the takeover of the century-old refinery was not mentioned as definitive conditions are to be concluded by the middle of 2020.
PDVSA once used Isla to process crude oil into gasoline, naphtha, diesel fuel, jet fuel, asphalt, base oils and lubricants, and to blend its diluted extra-heavy crude with light crude for export. But most of the complex has been offline for much of the past two years because of a lack of feedstock, maintenance and services from the holding’s separate Curaçao Refinery Utilities (CRU).
A thermal cracking unit at the refinery is currently processing Venezuelan heavy crude.
PDVSA’s loss of access to Bullen Bay deep water terminal will deprive it of critical storage space to tranship its cargoes on to larger vessels for Asian markets. Curaçao has been temporarily exempted from US sanctions on companies doing business with the state-run Venezuelan company.
The agreement with Klesch is the second one negotiated by Curaçao for a successor to PDVSA. The holding and Chinese state-owned Guangdong Zhenrong Energy (GZE) concluded a 40-year lease for Isla in November 2016 after PDVSA indicated it was not interested in renewing its agreement.
However, the current government once in office unilaterally cancelled the deal, saying the company did not have the money to deliver the project, and did not have “the unconditional support of the Chinese government as it had indicated when signing the agreement.”
