Venezuela May Re-Open Bahamas' Refinery

by Leroy Baker, Tax-News.com, New York

03 September 2004

The long period of high oil prices and bullish forward projections for energy markets are encouraging many oil companies to look at increasing capacity in their supply chains, and Petroleos de Venezuela SA (PDVSA), no exception, is considering reactivating its mothballed refinery in The Bahamas.

Minister of Trade and Industry Leslie Miller met with Venezuela's Minister of Energy and Mines Raphael D. Ramirez in Jamaica from Aug. 26-28, to discuss ways that the Venezuelan government could help to deflate exorbitant gas prices in The Bahamas, and PDVSA has now said that it is interested in either reopening the refinery, located on Grand Bahama Island, or dismantling part of it and erecting a smaller facility in its place, says Mr Miller. He adds that he has had very positive dialogue with Ramirez over the past few weeks, and the Venezuelan Government is more than happy and prepared to assist The Bahamas in seeing a dramatic drop in local gas prices.

At least $100 million needs to be invested in the refinery to restart it, said Miller, who will meet again later this week with Venezuelan officials in Caracas. Mr Miller says that the major gas companies - Shell, Esso, and Texaco - are trying to manipulate the market to keep gas prices high.

Chevron opened the refinery, with a 250,000 barrel-a-day capacity in 1970, but later sold it. PDVSA acquired the refinery when it bought the Bahamas Oil Refining Co. in 1990 for $103 million as part of a strategy to market more crude oil in the region, but the facilities have been left mostly idle by the Caracas-based company, which uses only about half of the oil storage tanks at the location.

In addition to the refinery, the complex also has storage tanks with capacity of up to 20 million barrels of crude and a large shipment terminal. Recently, the terminal ordered radar based tank gauging for the 43 storage tanks that are in use out of 73. Crude oil storage capacity is 6 million barrels, with 4.0 million barrels in service. Fuel oil storage capacity is 8.0 million barrels, with 4.5 million in service. Clean product storage capacity is 3.5 million barrels, with 0.5 million in service. On a combined basis, the Borco facility’s three operating jetties have six deep-sea berths. The berths are capable of handling anything from an ocean-going barge to a VLCC.

Prior to Mr Miller's approach, PDVSA was already planning to increase the amount of fuel oil blending at the Bahamas facility. PDVSA is also contemplating the blending of intermediate grades of Venezuelan fuel oil at the Bahamas terminal. Blendstock for such Borco operations could come from Europe, West Africa, or the US Gulf Coast. Meanwhile, PDVSA is injecting capital into the Borco operation to increase the number of tanks in service. Additionally, Borco is exploring the possibility of obtaining third party financing to accelerate the restoration process. PSVSA’s revised strategy for the Bahamas facility coincides with the appointment of Jaime Vargas, the outgoing manager of PDVSA’s fuel oil and VGO sales, as the new president of Borco.

Recommended