PDVSA closes purchase of Dominican Republic refiner stake

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Nov. 3 -- After several months of delays, Venezuela’s state-owned Petroleos de Venezuela SA (PDVSA) has completed its purchase of a 49% stake in the Dominican Republic’s state refiner Refineria Dominicana de Petroleo SA (Refidomsa), which owns a 34,000-b/d facility in Haina.

The Dominican Republic’s Treasury Minister Vicente Bengoa said the sale, worth $131.5 million according to Venezuelan media, would allow his country to become an oil distribution center for the Caribbean and possibly Central America.

As part of the agreement, the Dominican Republic will buy 30,000 b/d of oil from Venezuela in addition to the 50,000 b/d it already receives under the Caracas-sponsored PetroCaribe accord, which provides Venezuelan oil and gas at preferential prices.

Analyst BMI said, “The deal will further integrate the Caribbean island into Venezuela's PetroCaribe petroleum trading scheme, touted by President Hugo Chavez as an alternative to the region's dependence on the US for its energy needs.”

Chavez showed interest in the agreement in June, but PDVSA did not obtain a purchase memorandum of understanding from the Dominican government due to a regional crisis involving the ouster of Honduran President Manuel Zelaya, a close political ally of Chavez.

A further delay arose in August after California legislator Loretta Sanchez suggested the agreement would violate the terms of the free trade agreement between the US and the Dominican Republic. Under the FTA’s terms, oil refined by Refidomsa could be exported to any market while under the new agreement with PDVSA refined oil could be sold only to Venezuela.

Purchase of the refiner was reported in July, when PDVSA said it agreed to acquire a 49% interest in Refimdosa as partial payment of oil debts. The Dominican Republic owed $1 billion to Venezuela for oil supplied under the PetroCaribe program (OGJ, July 20, 2009, Newsletter).

In December 2008, Royal Dutch Shell PLC sold its 50% stake in Refidomsa to the Dominican government for $110 million, making the government sole owner of the Haina refinery.

Shell said its decision to sell the shareholding was part of its active portfolio management to realize value for shareholders and to refocus the downstream portfolio.

Contact Eric Watkins at [email protected].