Costa Rica, China Eye
$1 Billion Refinery Deal
By Robert Campbell (Reuters)
Costa Rica and China's top state oil company
CNPC are hammering out the details of a
planned refinery upgrade that could cost up
to $1 billion, the head of Costa Rica's
national oil company said.
The project, which would triple the size of
the Central American nation's only oil
refinery by 2015, is likely to be approved
by the two companies sometime in 2011 after
further engineering studies are completed,
Jose Desanti, the head of Costa Rican state
oil refinery Recope, said on Friday.
"We're just a few weeks from bringing (the
joint venture) to life," Desanti told
Reuters in an interview. "We think it will
be 14 to 18 months to give the green light
to start the project," he added.
The deal with CNPC evolved out of
conversations between the two companies when
Costa Rica dropped its diplomatic
recognition of Taiwan in favour of China in
2007.
In return for the switch, Beijing has
already made low interest loans to the
Central American nation and is building a
soccer stadium in the capital San Jose.
Chinese oil companies have been expanding in
the Americas as they seek to build up global
businesses and secure new sources of supply
for China's rapidly growing economy. CNPC
has a long-standing interest in Venezuela
and most recently Petrochina, a subsidiary
of CNPC, took over a strategic oil storage
terminal lease in the Netherlands Antilles.
However, China's entry into Costa Rica's
energy sector is unlikely to provide it with
access to new reserves for the foreseeable
future as public opinion in the
environmentally conscious nation is strongly
opposed to oil drilling.
Recope, which is Costa Rica's monopoly oil
refiner and distributor, has wanted to
expand its existing 20,000 barrels per day
refinery for some time to reduce its
reliance on oil product imports, but has
lacked the financial strength to do so on
its own alongside other projects.
The refinery upgrade will be carried out by
a 50-50 joint venture between Recope and
CNPC that will then lease the plant back to
Recope upon completion. The two sides hope
to finance 70 percent of the cost of the
upgrade.
"From feasibility studies, we estimate a
range of $800 million to $1 billion," said
Desanti.
Financing from the project is likely to be
provided in part by China at "attractive
terms," he added.
The expansion plan comes as global refining
margins have fallen sharply, forcing the
closure of several refineries in the United
States and elsewhere. Recope is confident
refining margins will recover in the medium
term, Desanti said.
Recope is also working on a modernization of
its terminal facilities in the Caribbean to
allow it to receive tankers capable of
carrying up to 80,000 tonnes of refined
products.
A new crude oil loading monobuoy is also
being studied.
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