Costa Rica, China sign supplement to refinery agreement

Costa Rica's state-owned refiner Refinadora Costarricense de Petroleo (Recope) and China National Petroleum Corp. have signed a supplement to their earlier agreement to build a joint venture refinery in the Central American country.

Jul 17th, 2009

Eric Watkins
OGJ Oil Diplomacy Correspondent

LOS ANGELES, July 17 -- Costa Rica's state-owned refiner Refinadora Costarricense de Petroleo (Recope) and China National Petroleum Corp. have signed a supplement to their earlier agreement to build a joint venture refinery in the Central American country.

Costa Rica's Minister of the Presidency Rodrigo Arias said the supplement will not violate Recope's legal monopoly over refining and distribution in the country, a matter that earlier had concerned the state comptroller’s office.

But even the supplement is subject to scrutiny by the comptroller’s office, which last March rejected the initial contract that would have set up the joint venture, considering it illegal to transfer Recope's legal monopoly to the new semipublic enterprise.

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

The comptroller’s office 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’s office also said the administration had to redefine the project and resubmit it for approval.

Presidential Minister Rodrigo Arias responded by saying the executive would ask Justice Minister Viviana Martin and Atty. Gen. Ana Lorena Brenes to participate in the design of a new proposal to be submitted to the comptroller.

The joint venture project aims at expanding Recope’s refining capacity, reducing its costs, improving prices and quality, and expanding the market to other Central American countries—something of considerable interest to China.

In March Chinese state media reported that CNPC subsidiary PetroChina (South America) Co. Ltd. saw its oil output hit 10.56 million tons in 2008, an increase of 2.06 million tons from 2007 a year earlier.

The PetroChina Group set up its South American branch in June 2008, aiming to take charge of oil and gas investment and services in 33 Latin American countries, including refinery operations.

In December CNPC and Recope were jointly evaluating plans to set up a new $6 billion Costa Rican refinery with a processing capacity of 200,000 b/d in addition to earlier plans calling for CNPC to assist Recope in expanding the capacity of the Puerto Moin refinery to 60,000 b/d from 25,000 b/d by 2013 (OGJ, Dec. 1, 2008, Newsletter).

Contact Eric Watkins at hippalus@yahoo.com.

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