Engineering News

PetroChina Held Talks On Aruba Refinery - Aide
March 06, 2009

PetroChina Co. Ltd. officials have met with Aruban Prime Minister Nelson Oduber to discuss a potential purchase of Valero Energy Corp.'s refinery on the island, an aide to Oduber said.

"They had a meeting at the end of last year," Eric Brete, the aide, told Dow Jones Newswires in a telephone interview on Thursday. Brete said a follow-up meeting had been discussed but has not yet been scheduled.

The interest exhibited by PetroChina, the publicly traded arm of state-owned China National Petroleum Corp., is the latest example of China's eagerness to pursue energy assets overseas despite the country's contracting oil demand and the recent plunge in prices.

Valero Energy, the largest oil refiner in the U.S., operates Aruba's sole refinery, which has the ability to process 252,000 barrels of crude oil a day. The refinery has been on the block for 16 months.

Valero spokesman Bill Day declined to comment on whether Valero had met with PetroChina officials. Day said the company has begun talks with interested parties.

A PetroChina spokesman didn't respond to requests for comment.

The island is located 15 miles off the coast of Venezuela, and the refinery is geared toward processing low-quality crude oil from the South American nation. PetroChina has invested in crude oil exploration and production in Venezuela, which could give it access to crude that's well-suited for the refinery.

PetroChina's Venezuelan investments are just one example of the country's growing appetite for foreign oil assets.

"If you look beyond this year, it's not a hard case to make that China's growth in demand is going to be very robust," said Paul Ting, an independent oil analyst based in Short Hills, N.J. Anticipation of rising demand has fueled China's interest in foreign crude.

In February, state-owned China Development Bank Corp. agreed to loan two Russian companies $25 billion in exchange for greater access to Russian crude oil. Chinese oil companies have increased their crude purchases from Brazil and are in talks to provide $10 billion to state-controlled oil company, Petroleo Brasileiro SA (PBR), or Petrobras, for funding exploration and production. PetroChina has completed a set of deals to secure liquefied natural gas cargoes from Australia and Qatar. The company is currently in talks with Exxon Mobil Corp. (XOM) to import liquefied natural gas from the Gorgon field in Western Australia.

This voracious appetite for natural resources may prompt PetroChina to buy a refinery that others have shied away from.

Valero's attempt to sell the refinery to Petrobras fell through in September after nearly a year of talks. A fire at the plant in January 2008 delayed the negotiations, while slumping refinery profits later in the year ultimately thwarted the deal, as Petrobras opted to invest in other opportunities.

Weak refining margins due to low demand for refined products have deterred potential buyers. U.S. refiner Sunoco Inc. (SUN) has announced plans to shutter one refinery if it doesn't sell. Western Refining Inc. (WNR) has been trying to sell an East Coast refinery for more than a year, but on Thursday said it didn't expect to find a buyer in the near term.

Valero itself has stepped back from an aggressive plan to divest assets and currently has only its Aruba refinery on the block.

Valero purchased the refinery for $495 million in 2004 and has invested nearly $500 million in it, according to Valero's Web site.

However, it's difficult to determine a precise asking price for the plant. People familiar with the previous negotiations with Petrobras said that an early price of $1.5 billion-$2 billion had been discussed. However, the downshift in demand for useful oil products refined from crude oil since those talks began could result in a lower the price.

Source: Dow Jones Newswires

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