China Firm Seeks State Financing For $5.5B Caribbean Oil Project

Reuters

BEIJING, Nov 2 (Reuters) - Commodity trader Guangdong Zhenrong Energy Co. Ltd is in talks to secure funding for a $5.5 billion plan to upgrade a Caribbean oil refinery and build a natural gas terminal, giving China a foothold in a strategic oil hub.

The project, which the state-owned firm aims to lead with support from the country's oil majors, would give the world's No.2 oil consumer control of the Isla refinery on the tiny island of Curacao that supplies fuel to Venezuela and crude oil to Asia.

State-owned Guangdong Zhenrong agreed a memorandum of understanding (MOU) in September with the government of Curacao, an autonomous Dutch state off Venezuela's northwest coast, to upgrade its aging refinery and build a gas terminal.

A delegation from Curacao, including government lawyers and the head of its refinery facilities, is in southern China this week to visit oil and gas plants, as parties move negotiations beyond the initial cooperation pact, two top executives at the Guangzhou-based China firm said.

"We are discussing with China Construction Bank, China Development Bank, ICBC and Bank of China to provide the bulk of the financing. Some banks have already made detailed proposals," said Chen Bingyan, a company advisor and the project's key negotiator.

Early work showed the project, including the refinery upgrade, increased oil storage and the natural gas facility which is designed to provide clean fuel to local users, would require about $5.5 billion in total investment, Chen said.

The figure was below the $10 billion in September's preliminary agreement, which referred to the eventual size of the investment the Chinese firm committed to spend on Curacao, he said.

The 335,000 barrel-per-day Isla refinery, located just 50 km (31 miles) northwest of Venezuela, has for decades been operated by Venezuela's state oil firm PDVSA under a lease agreement, but the cash-poor company has been reluctant to meet Curacao's requests to modernise the plant, which locals blame for pollution.

China in the last decade has become one of the top buyers of Venezuelan crude and fuel through an oil-for-loans financing deal, and some of its purchases use Curacao as a transfer point.

China purchased nearly 490,000 bpd of crude oil and products from Venezuela in the first nine months this year, roughly 6 percent of its total purchases. <C-CN-VE-FZ>

'BIGGER BROTHERS' TO PARTNER

Guangdong Zhenrong, an oil and metals trader with little experience in the refining or gas terminal business, is aiming to lead the upgrade project and seek technical and operational support from the country's state energy giants.

The trader hopes to be the single-largest stake holder in the project, and has entered into preliminary cooperation agreements with engineering and construction units of Beijing's top oil firms including CNPC, Sinopec and CNOOC, said Chen and a second top executive.

"As a smallest sibling, we'll lead using our relationship skills. Our bigger brothers will pitch in with their expertise," said the second executive, who asked not to be named.


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