Mérida, August 31, 2020 (venezuelanalysis.com) – The owner of Curacao’s La Isla refinery, Refineria di Korsou (RdK), is suing Venezuela’s state-run oil company PDVSA for US $51 million.
RdK claims that PDVSA missed service payments on the leased out facility between February 2018 and December 2019, when the Venezuelan firm’s contract was terminated.
The lawsuit was lodged last Wednesday in a New York State court after local efforts to collect on the debt failed in March. Earlier this year, a Curacao court ruling spurred RdK to attempt to seize PDVSA stocks at the nearby Bonaire Petroleum Corporation (BOPEC) oil terminal as payment for the debt before backtracking on the move.
La Isla refinery is located 140 kilometres off Venezuela’s northern coast, and has been leased out by PDVSA since 1985. Last December, RdK abruptly cut short a year-long lease extension, citing the lack of a “reasonable offer” from the Venezuelan state entity. The refinery is currently idle after a lease deal between RdK and European industrial conglomerate Klesch Group fell through earlier this year. PDVSA’s total production at La Isla stood at 235,000 barrels since February 2018, well below the refinery’s 335,000 daily capacity, according to RdK.
At the time of writing, neither PDVSA nor the Maduro government have responded to RdK’s legal action.
The RdK lawsuit is the latest of a number of legal actions against the Venezuelan government, including settlement debt collection efforts from US oil giants Exxon Mobil and ConocoPhillips, Canadian mining firm Crystallex, and US glass firm O-I Glass. Caracas is also using the courts to contest the seizure of foreign based state assets, such as PDVSA’s US subsidiary CITGO and US $1.4 billion of gold stored in the Bank of England.
‘Unacceptable’ lack of PDVSA maintenance at Bonaire terminal
PDVSA also faced problems at the BOPEC oil terminal in the nearby island of Bonaire last week, with local authorities accusing the Venezuelan firm of a prolonged and “unacceptable” lack of maintenance on Wednesday, ordering Caracas to withdraw its crude stocks to a different location “in order to take away risks.”
According to BOPEC spokespersons, PDVSA has failed to meet Bonaire’s Environment and Transport Inspectorate safety limits, citing examples including a leaking “floating roof” in an oil tank and “unusable” docks.
PDVSA and other state-run entities have been forced to make extensive spending and investment cuts as seven years of recession and tightened US sanctions have greatly reduced foreign currency income. Analysts have linked state underinvestment to a vast array of deteriorated infrastructure in the country and the recent spill of an estimated 20,000 barrels of oil close to PDVSA’s El Palito refinery in Carabobo State.
The BOPEC relocation adds to a variety of problems in PDVSA’s Caribbean-based refining and logistics network in recent months, with many third parties chased off by the threat of US secondary sanctions and a number of Venezuelan supertankers seized as collateral on international settlement deals.
PDVSA uses the BOPEC site to alleviate crude oil storage bottlenecks, which have been recently exacerbated by sanction- and COVID-induced contractions in international demand.
Starting with financial sanctions in August 2017, Washington has successively imposed unilateral measures against the Venezuelan oil industry, including an embargo, a blanket ban on all dealings with Venezuelan state entities, and secondary sanctions against Russian energy giant Rosneft. Output in July stood at a decades-low of 339,000 bpd.
US sanctions have likewise hurt the country’s refining capacity and generated severe fuel shortages. According to Reuters, fuel production is currently around 30,000 bpd, well short of the pandemic lockdown demand level estimated to be around 180,000 bpd.
Recent Iran-backed efforts to restart production at PDVSA’s El Palito and Cardon refineries have had mixed results, with Reuters reporting that production once again had to be stopped at the latter this week after a fluid catalytic cracking unit failed. The adapted naphtha reformer at the Cardon refinery allegedly has a capacity to produce 25,000 bpd of fuel, and production is expected to restart in the coming days, according to union leader Ivan Freites.