Citgo drops Aruba refinery project

Citgo, the US refiner that Venezuela’s political opposition wrested from its national oil company, Petróleos de Venezuela (PdV) last year, is abandoning a refinery project in Aruba, sparking fury on the Dutch-controlled island.

The Citgo headquarters in Houston, Texas. (Photo: bloomberg.com)

In a December 27 letter, Citgo Aruba Refining (CAR) told workers that US sanctions on PdV imposed in January 2019 “have impacted not only the CAR refurbishment/upgrader project but also resulted in severe financial hardship restricting the ability to continue support of day-to-day operations.” As a result, the company will cease operations and terminate its working agreements as of January 30, 2020, the letter states.

Aruba, a tiny island that once formed part of PdV’s strategic logistical network in the Dutch Caribbean, is crying foul. CAR has missed lease payments on the refinery and associated oil terminal since March 2019, taxes have not been paid since 2017, refinery maintenance has been neglected, and now the company is shirking its labour obligations, a senior official close to the Aruban government reported.

Venezuela’s political opposition wrested Citgo from national oil company Petróleos de Venezuela.

“This is a horrible abuse,” the official said. None of some 70 local workers affiliated with two unions have signed the proposed severance package, union leaders say.

The Aruba Labor Federation is reaching out to Citgo chairman Luisa Palacios today to insist on payment of labour debts and sustained employment at the terminal, which it says continues to operate. The Independent Oil Workers’ Union (IOWA) plans to take Citgo Aruba to court under Dutch jurisdiction.

Among its many infringements, Citgo Aruba Refinery is accused of missing lease payments and neglecting refinery maintenance. (Photo: bomdia.com)

The terminal, where CAR imports fuel for the minuscule local market, is of particular local concern if the company is allowed to leave Aruba at the end of this month. The Aruban government has tried since last year to repossess the refinery and terminal under a proposed temporary suspension agreement between Aruba-owned local refinery owner, RDA and CAR.

However, the two sides failed to strike a deal, and CAR has impeded RDA from accessing the facilities. Citgo has not responded to a request for comment.

Embattled Venezuelan president Nicolas Maduro (Photo: fortune.com)

CAR’s top executive Joe Crawford could not be reached. The government has said it has not been formally told of CAR’s decision to withdraw, but it is demanding that the company comply with all labour obligations.

The dispute opens a thorny new legal front for Venezuelan opposition leader, Juan Guaido, who is recognised by dozens of Western countries, including the Netherlands, as interim Venezuelan president in place of Nicolas Maduro. Despite US sanctions that the White House augmented with targeted penalties on Guaido’s National Assembly rival Luis Parra and his allies, the Maduro government has not fallen.

Venezuela’s opposition leader Juan Guaido (Photo: bloomberg.com)

Citgo’s board shifted into opposition hands last year giving Venezuelan opposition leader, Juan Guaido’s parallel government administrative control over 750,000 barrels per day of US refining capacity but without direct access to the refiner’s revenue. Under a vaunted US-backed administrative structure meant to underpin a future political transition, Citgo is now governed by an “ad hoc” PdV board in exile headed by veteran PdV executive Luis Pacheco.

The main task of the ad hoc PdV board is shielding Citgo, Venezuela’s most valuable overseas asset, from myriad creditors, including jilted PdV bondholders and arbitration claimants that are pressing their cases in US courts.