Venezuela, Ecuador again discuss building refinery

Eric Watkins
Senior Correspondent

LOS ANGELES, July 16 -- Venezuela and Ecuador, avowedly mixing international politics and oil processing, have renewed a longstanding agreement to build the largest oil refinery on the Pacific Coast of South America.

"Instead of having refineries in the United States, we decided to keep them here in our geopolitical context," said Venezuela's President Hugo Chavez in announcing the plan jointly with Ecuador President Rafael Correa.

Chavez said his goal was to provide "energy security for all the people in the (South American) continent" as opposed to being dependant on the US for oil products. "Everything ended up in the United States; that's what the empire and colonialism are all about," Chavez said.

Plans call for a 300,000-b/d refinery in El Aromo, 250 km from Quito, the Ecuadoran capital. Construction of the $5-$10 billion facility is expected to begin in 2010 and complete in 2013.

The refinery will be operated jointly by the countries' state-run oil firms, Petroleos de Venezuela and PetroEcuador. According to Chavez, PDVSA will own a 49% stake in the refinery, while Petroecuador will hold the majority 51% stake.

The two countries have been discussing the possibility of jointly constructing such a refinery since July 2005 when Correa—then Ecuador's finance minister— visited Venezuela.

At the time, Correa's ministry said Ecuador and Venezuela were studying the possibility of a joint refinery as well as the possibility of processing more Ecuadorian crude in Venezuelan refineries.

In October 2005, Chavez and former Ecuadoran President Alfredo Palacio agreed to set up a refinery in Ecuador, saying it was a project "more suitable" to Petroecuador than sending crude to Venezuela for processing by PDVSA due to the company's lack of spare refining capacity.

Venezuela reversed that decision in May 2006, saying it had enough spare refining capacity and was willing to use its Curacao-based Isla refinery and other facilities to process Ecuador's crude oil as part of an energy cooperation agreement.

The agreement came just a week after Ecuador revoked the contract of Occidental Petroleum over accusations that the Los Angeles-based company sold part of an oil block without government authorization (OGJ, May 19, 2006).

Contact Eric Watkins at hippalus@yahoo.com

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