Valero Refining Company-Aruba N.V., a subsidiary of
Valero Energy Corporation
), announced its decision to cut down operations at its Valero
Aruba Refinery and transform it into a refined products terminal.
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Besides being on the look out for a prospective buyer for the
refinery, Valero intends to keep the refinery fully equipped, just
in case the company decides to resume operation at the site.
Equipped with both deepwater berths and smaller berths, the Aruba
refinery has the resources to serve as a world-class crude and
refined products terminal, with capabilities to load the largest
crude ships. Further, the facility's proximity to the booming
markets and encouraging political scenario are added benefits and
enhances feasibility for operations.
Valero and the government of Aruba have been in search of a buyer
for months for the plant. Per the rumors,
PetroChina Co. Ltd
) is believed to have bid for the plant earlier in 2012 as the
Chinese giant tries to increase its holding in the American market.
The reason for the deal to be dropped remains uncertain but the
plant's reliance on more expensive fuel oil to power rather than
cheaper availability of natural gas has been earmarked as a
In the past few years, the Aruba refinery has been idled at least
twice. The most recent occurrence was earlier this year, due to
poor profit margins that have affected refiners in Europe, the
Caribbean and on the U.S East Coast.
The conversion of the refinery into a terminal will also result in
smaller workforce. The restructuring and reduction in personnel is
projected to be completed before 2012 end. Valero will carry on
providing jet fuel, gasoline, diesel and fuel oil to the island, as
well as provide third-party terminal services. The company intends
the site to return to profitability by using its strategic location
and shipping facilities to its advantage.
Valero carries a Zacks #3 Rank, which is equivalent to a Hold
rating for a period of one to three months. Longer term, we
maintain our Neutral recommendation.