Update Country Report Curaçao 04 May 2021

Event

In mid-April the Refineria di Korsou (RdK, the state-owned firm that controls Curaçao's Isla refinery and Bullen Bay terminal) revealed that, in December last year, it agreed on a short-term lease for Mercuria (a Cypriot oil-trading firm) to use oil storage facilities at Bullen Bay.

Analysis

Despite being signed in December, the lease agreement with Mercuria only became public when the first vessel delivered oil cargo to Bullen Bay's storage facilities. The six-month lease allows for 1.2m barrels of oil products and crude storage and can be extended by mutual agreement. RdK did not give any indication of the financial value of the lease with Mercuria.

Nonetheless, the potentially extendable lease is a positive development, as it could bring in much-needed revenue for the government, which has been struggling to find a long-term partner to operate Bullen Bay and the Isla oil refinery. Both properties have been largely inactive since December 2019, when a lease with PDVSA (the Venezuelan state oil firm) expired. RdK has been trying to negotiate a new operating agreement since then, but two potential deals have fallen through, one with China's Guangdong Zhenrong Energy and another with Switzerland's Klesch Group.

The government is currently in discussions with the Curaçao Oil Refinery Complex (CORC), a privately held consortium comprising mainly domestic investors whose lead partner is Dick & Doof, a Netherlands-based firm. These talks appear to be progressing slowly, however, partly owing to uncertainty around when Curaçao's new Movementu Futuro Kòrsou (MFK) government will take office following its election victory in mid-March. The outgoing government of the prime minister, Eugene Rhuggenaath of the Partido Alternativa Real, could be reluctant to sign a deal that may not find favour with the incoming MFK government. Charles Cooper, an MFK legislator who is expected to become the next minister for traffic, transport and spatial planning, has indicated that he would prefer a local partner for Isla, in line with the MFK's pro-independence stance.

Impact on the forecast

We now expect that, in the very near term, the government will make some progress on fiscal consolidation-an important condition for Dutch financing-with revenue from the Bullen Bay terminal. However, once the lease ends, fiscal pressure is likely to mount again and persist until tourism picks up significantly.