Lagniappe

 

 

Oliver L Campbell:
PDVSA’S sale of two asphalt refineries

I have to rectify what I previously assumed in my article “PDVSA to sell two asphalt refineries.” My conjecture, that PDVSA wanted to free up 75,000 b/d of heavy crudes so that, instead of being used to produce asphalt, they could be refined to yield a slate of more profitable products, was wrong. This was never an option since NuStar only agreed to buy the refineries on the condition that PDVSA continued selling them the oil.

The crude oil sales contract provides for PDVSA to sell NuStar 50,000 b/d of Boscan crude and 25,000 b/d of Bachaquero crude. There is also an asphalt sales contract for PDVSA to supply NuStar 13,000 b/d of roofing flux asphalt, and 22,000 b/d of paving grade asphalt during the period of April to September which is when road work takes place. The asphalt will continue to be shipped from Venezuelan refineries in dedicated tankers with heating facilities. Both contracts are for a seven year term, and can be renewed for periods of two years thereafter.

The assets are to be sold for approximately $450 millions and working capital, presumably oil stocks, for approximately $100 millions. The latter will include partially processed material, so it is not practical to dispose of the stocks to another buyer. However, it is clear they do not form part of the purchase price for the refineries.

Whether the sum of $450 millions is an excellent price, as the oil minister maintains, I leave to the experts on refinery valuation. Also, the minister did not mention if any profit above the net book value will be subject to US long-term capital gains tax. However, the seven year deal will give Venezuela time to construct deep conversion facilities and so open up the option to refine crudes such as Boscan and Bachaquero to produce the more profitable light fractions.

 

Oliver L Campbell, MBA, DipM, FCCA, ACMA, MCIM was born in El Callao in 1931 where his father worked in the gold mining industry. He spent the WWII years in
England, returning to Venezuela in 1953 to work with Shell de Venezuela (CSV), later as Finance Coordinator at Petroleos de Venezuela (PDVSA). In 1982 he returned to the UK with his family and retired early in 2002. Petroleumworld does not necessarily share these views.

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Petroleumworld News 11/16/07

Copyright© 2007 Oliver L Campbell. All rights reserved.

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