Update Country Report Curaçao 20 Jan 2021

Event

In early January 2021 Curaçao announced that it had selected a new preferred bidder to take over the operating lease of the Isla oil refinery and Bullen Bay terminals. A successful conclusion to these negotiations would have positive economic implications, following a year of minimal activity at the refinery.

Analysis

The new preferred bidder is Curaçao Oil Refinery Complex (CORC), a privately held consortium comprised of mainly domestic investors. Negotiations are already under way, with the aim of signing a contract by the end of February. This would enable the refinery, which produces 335,000 barrels/day, to resume operations, following a year of almost no activity, after the previous operator's lease expired at the end of 2019.

A press release issued by CORC noted that the consortium will work with a major oil group and the UN Industrial Development Organisation. Local media have reported that the oil group mentioned is Brazil's GDE Trading, which would support agreements with Brazil's Petra Energia and China Petroleum and Chemical Corporation (Sinopec). The crude oil for the Isla refinery will most likely come largely from Brazil, Nigeria and Russia. Previously, most oil came from neighbouring Venezuela, where the petroleum industry has now come to a near-complete standstill.

Securing a new operator for the Isla refinery would be positive for the economy, which suffered from a sharp drop in refinery revenues in 2020 at the same time that tourism revenues slumped as a result of the coronavirus (Covid-19) pandemic. Several previous efforts to agree a new operating lease fell through in 2019 and 2020. If an agreement is reached, refinery revenues could resume towards the end of 2021. In addition, securing a deal by February could lead to a popularity boost for the incumbent government of the prime minister, Eugene Rhuggenaath, which is seeking re-election in March.

Impact on the forecast

Our real GDP growth forecast for 2021-22 will be subject to a small upward revision, from 10.2% and 7.4% respectively at present, should negotiations with CORC result in renewed activity at the refinery.