The refinery law goes to Parliament Monday afternoon

I looked at a number of documents, and I am stressed, the suggested law going to Parliament, the legal framework that will start the refinery-ball rolling, is very unfavorable to the island. Many of my friends posted commentaries on line, and I used some of their materials.

Basically, regarding the Definitive Participation Agreement, Parliament is being asked to ratify the agreement the MinEnergy negotiated with CITGO for the lease of the refinery, and while some details of what it entails were made public, many are unclear and undefined.

WHAT CAN SAVE US?! It CITGO is unable to get the needed US$100 million, from its parent company PDVSA, which this week was downgraded from CCC rating to CC, by Standard & Poor, which means it went from vulnerable to very vulnerable. When asked if concerned about the downgrade of PDVSA, the MinEnergy said that the island’s agreement was with CITGO. Duh.

Getting the legal documents to Parliament for perusal and study was like pulling teeth. The opposition had to threaten to complain to the governor, in order to get copies of the suggested law into their hands, and then members of Parliament only had FOUR days to study the materials carefully, before the public debate in Parliament.

The MinEnergy was secretive about the whole process, as the documents traveled from the board of CITGO and its Ladder of Command, to the board of Valero and its Ladder of Command. It is our Parliament’s turn now. The papers will later travel to the governor’s office, a true via dolorosa.

My friends who saw parts of the agreement report that it is VERY unfriendly towards us, because the MinEnergy  seemed to have written it by himself, not a single expert by his side, not from Shell, nor from Delft University of Technology, not even from the Rietveld Art Academy. Someone. Someone would have been better than no one. Anyway, if they had one of these experts on board he/she would have voted against the move, and tell us to fohgeddaboudit, the reopening of the refinery is baloney.

But the MinEnergy is in a rush, he wagered his entire political career on the opening of the refinery, so he agreed to the following, and I am quoting: “In the event of breach of contract by THE GOVERNMENT OF ARUBA and/or RDA, CITGO, at its discretion, shall have the right to: (i) demand compliance and obtain enforcement of THE GOVERNMENT OF ARUBA’s and/or RDA’s obligations under the Definitive Participation Agreement and the Lease Agreements, (ii) terminate or declare annulment of the Definitive Participation Agreement or Lease Agreements, in which event CITGO’s right to claim compensation as the Signatories may agree on during the Definitive Participation Agreement period.”

Wow, did you get it? That said that in the event that Aruba or RDA, Refineria di Aruba, makes the smallest mistake, let’s say there is a current interruption, then CITGO can immediately terminate the contract and demand compensation of minimum 300 millions, and that amount could go up to 600 of 750 million, if CITGO indeed makes the investment.

So our Parliamentarians will be asked to approve a government guarantee on Monday; that guarantee may increase to one billion florins, and could be collected at a drop of a hat by CITGO. They may operate here for three months, then decide that RDA did not fulfill its obligations, and ship out of here, leave the island with a steep invoice; it means that we each owe a lot of money to CITGO for their investment here, every man, woman, and child, must pay up.

The agreement allows instant termination, no grace period; CITGO may demand immediate payment, and ship out.

My friends conclude it is a huge risk, under the actual terms the refinery deal delivers more risk than benefits.

For those interested: This is a document prepared by the MinEnergy office, it will give some English speaking readers an idea, of what the government’s story is:

http://www.bondia24.com/sites/default/files/presentacion%20Citgo.pdf

Quote from Bloomberg: ”The operating assets of CITGO Holding Inc., PDVSA’s U.S. refining subsidiary, are already pledged to creditors. The unit’s $1.5 billion bonds due in 2020 are secured by a 100% percent equity stake in CITGO Petroleum Corp.”

What I said in April stand: The whole exercise is designed to sooth voters and avoid having to make tough budget decisions. One of my smart friends writes: “We seem to knowingly undertake enormous financial and environmental risks which someone else will have to clean up in future. Think about the implication of an open yet crumbling refinery as far as environmental, health, safety and many other liabilities.”

I am stating the obvious but the government of Aruba is under tremendous pressure from CAFT and if the refinery start-up will make up for the AWG 50 million shortfalls in the 2016 budget, halleluiah, but at what cost?

 

 

Share on:

September 26, 2016
Rona Coster