Costa Rican watchdog approves refinery deal with China

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Sept. 4 -- Costa Rica’s Comptroller Office, reversing an earlier decision, gave its approval of a $1 billion contract signed by state-owned refiner Refinadora Costarricense de Petroleo (Recope) to form a joint venture with China National Petroleum Corp. (CNPC).

“This is extraordinary news for the country,” said Rodrigo Arias, head of the cabinet of ministers and brother of Costa Rica’s President Oscar Arias. The Arias government severed diplomatic relations with Taiwan in 2007 and signed the agreement for the JV during the visit of Chinese President Hu Jintao in 2008.

The decision by the Comptroller reversed a ruling in March, when it declared invalid the agreement signed in 2008 for Recope to form a JV with the CNPC, saying the proposed joint venture would have violated Recope’s legal monopoly on refining and distribution in Costa Rica.

The Comptroller also said it would be illegal for Recope to provide loans to the JV or to buy the new company’s assets after 15 years of use as provided for in the initial agreement.

The Comptroller said if Recope were bought out, there were no provisions for what would happen to the public funds invested by Recope in the semipublic enterprise. At the time, the Comptroller said the administration had to redefine the project and resubmit it for approval.

In July, Recope and CNPC signed a supplement to their earlier agreement, which Rodrigo Arias said would not violate Recope's legal monopoly over refining and distribution in the country (OGJ Online, July 17, 2009).

Contact Eric Watkins at [email protected].