PDVSA secures initial guarantee for Abreu e Lima refinery

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Nov. 5 -- Venezuela’s Petroleos de Venezuela SA said it has secured the $400 million it needs as an initial guarantee for the construction of the Abreu e Lima refinery in Brazil.

The statement followed earlier remarks by Venezuela Oil Minister Rafael Ramirez, who doubles as president of PDVSA, that the firm “is working” to obtain the financing it needs to secure its share of the funding for Brazil’s long-delayed Abreu e Lima refinery project (OGJ Online, Apr. 26, 2010).

“We confirm our participation in Abreu e Lima and are working on the funding issue,” said Ramirez of the 230,000 b/d refinery which is to be built near Recife. The facility is due to start operations in 2012, processing extra-heavy crude from Venezuela’s Orinoco oil belt.

Numerous delays
The Abreu e Lima project has been subject to numerous delays, mostly attributed to the inability or unwillingness of PDVSA to meet the financial terms of its agreement with Brazil’s Petroleo Brasileiro SA (Petrobras).

Under terms of its agreement with Petrobras, PDVSA is to provide a financial guarantee that will enable it to obtain its 40% share of the $5.8 billion loan that the Brazilian firm obtained from the country’s national development bank BNDES to finance the project.

The agreement between PDVSA and Petrobras calls for Venezuela to provide 40% of the total investment, while Brazil would contribute the remaining 60%. The agreement also specifies that BNDES would lend all of the financing for the project.

Petrobras downstream director Paulo Roberto Costa earlier said that PDVSA had not yet tendered the more than $400 million it owed as a first payment for its stake in the refinery.

Costa was repeating remarks he made in March, when he said Petrobras had received no official word from PDVSA about its payment of $490 million for the refinery.

Neither PDVSA nor Ramirez stated where the Venezuelan firm obtained the $400 million needed to meet the BNDES guarantee this week.

Rosneft-Ruhr Oel deal
However, Ramirez's comments came after Russia’s Rosneft signed an agreement to acquire the 50% stake in German refining group Ruhr Oel from PDVSA for a reported $1.6 billion. On Nov. 1, Rosneft Chief Executive Eduard Khudainatov said his firm would complete the deal with PDVSA in 3-4 months.

Ruhr Oel is a joint venture oil-processing and marketing venture in which PDVSA and BP each hold a 50% stake. The joint venture owns shares in four oil refineries in Germany: 100% in Gelsenkirchen, 24% in MiRO, 25% in Bayemoil, and 37.5% in PCK Schwedt.

Altogether, Ruhr Oel processes about 23.2 million tonnes/year of oil, which makes up 20% of the entire German oil processing sector.

Ramirez last month also said that PDVSA was considering selling some assets of its Houston-based subsidiary, Citgo Petroleum Corp, calling it “a bad business” for his country.

Ramirez remarks echoed similar ones by Chavez who called Citgo a “bad business” for his government saying it doesn't deliver enough dividends.

Chavez questioned how much Citgo would fetch if it were sold along with its refineries and thousands of US service stations, and said he guessed it should be worth at least $10 billion.

Contact Eric Watkins at hippalus@yahoo.com.

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