Why, Where, When
The Isla refinery was started by the Curaçaosche Petroleum Industrie Maatschappij
CPIM, a Shell daughter, in 1918, to process oil from the Venezuelan
Lake of Maracaïbo. At the same time, Standard Oil set up the Aruba Lago
refinery. (The Venezuelan president preferred this over a power
concentration around Maracaïbo.) After some ups and downs, the refinery
got into high gear with World War II. The Allied forces in North Africa
and the Allied air forces in Great Britain were supplied with oil
products from Curaçao only. This resulted in a fabulous boom in economy
and population. Many workers immigrated from other countries in the
region. Curaçao harbor was in the top ten of the world qua tonnage.
The Isla refinery was located on an island
in the Schottegat of Curaçao harbor. One result was heavy air pollution
downwind and oil pollution in the three harbors and the adjoining
coasts. It doesn't need explaining that the immigration wave, the
visiting sailors and the American forces stationed on the island had an
enormous influence on the sleepy, kind and tranquil island society.
After the Soldiers Went Home
In 1954 the Netherlands Antilles became autonomous with the Statuut.
Just about then, Shell started automatisation of the refinery, and
needed many less workers. The boom of WWII was over anyway. The economy
was more or less saved by the so-called Off-Shore industry. This is not
an industry
at all but exclusively run by accountants and such
(often not even living in Curaçao), paying a token amount of tax here
and so saving enormous amounts on their profits made elsewhere. All
that, still enormous, tax income went to the government, which naturally
expended to an enormous and inert body. But that's another story.
| Political Links |
Because refinery developments are so intricately, inextricably, intermingled
with our politics, to stay abreast of latest developments please visit our Circus:
(Use [Ctrl+F] there to find Isla) |
| Blame Shell for it |
Royal Shell, like KLM, was set up in a colonial era and behaved like it.
For
example, wherever they had a refinery they housed their staff in
villages of their own, surrounded by wire fences and with guards at the
entrance gates. These kept the natives out effectively. You may
well have needed this in Indonesia or Nigeria, but here it was just a
waste of money. One result was that the Shell community was largely
isolated from Curaçao society. They even ran their own bus lines.
Shell
got the blame for a lot of things that were wrong, but it often remains
a question if they were actually guilty. One example is the water
problem. Because Shell needed enormous amounts of fresh water, they
pumped up ground water and took measures to preserve rain. These
measures tended to rape the landscape and were probably not very useful
anyway. About the often-quoted report that Shell's pumping resulted in a
lower level of ground water all over Curaçao, we have to think this is
nonsense.
The island consists of over 200 separate rain catchment
basins. All this water runs off to sea, eventually, be it surface or
ground water. When you pump in one of those basin areas, you just pump
water out of that one, not the one next to it. Let alone one on the
other end of the island. The legend is based on a report on well levels
all over the island, that were much lower than some years before.
However, that survey had been made after a long dry period when water
level would be low anyway.
Shell actively supported the community in social and cultural
activities, and paid for the construction of several community buildings
(like the C.C.C. Cultureel Centrum Curaçao, now in use by NAAM.)
Overall, the period when Shell was operating here was, politically, the
most stable and, economically, the most affluent Curaçao has ever
known. That society was heavily disrupted by this sudden
shock-transform of a small pre-industrial society to a much larger
highly industrial one almost goes without saying. |
Exit Shell
In 1985 Shell announced the close-down of their Curaçao operation. For
the grand total of 1 guilder, all their facilities were sold to the
government which, predictably, panicked. PM Maria-Liberia Peters and George Hueck, a notoriously corrupt politician associated with FOL and Nelson Monte,
proceeded to sell virtually all rights to Venezuela. National oil
company PdVSA took over the refinery operations, putting up no guarantee
and paying even less.
PdVSA really must have felt they
had us suckers good. Whatever infamous amount of money they paid those
two characters (just an insinuation - we can't know), it was well worth
it. Just in that period, there was another one of the many oil crises
looming up, and the Venezuelans discovered that having a supply of crude
oil was not enough - you needed a refinery to guarantee a market.
Within a year, Venezuela was busy buying refineries all over the world.
Meanwhile,
they do pretty much as they like here. Maintenance is sloppy. While the
Shell refinery during its top period was one of the safest in the
world, since PdVSA took over they've had their share of fires, accidents
and other mishaps.
The grapevine also has it that the refinery doesn't trouble to pay the rent, but with our transparent government
this is hard to check.
In 2006 Dutch Milieudefensie collected signatures
in an action "Stop Shell, join us"
You can download their report here:
"Use your profit to clean up your mess"
| Counting the Blessings |
| PdVSA pays a rent of $15M per year for the Isla refinery. That's it: PdVSA does not pay any land tax or land rent - no import duties - no sales or purchase tax - no profits tax. Nothing, except for that measly rent, which barely covers the .5G we will have to cough up
in 2020 to demolish what will by then be left of the installations. In
the 35 years since 1985, the total of rent paid then will be $525M.
|
More and more complaints are coming from the barrios downwind of the refinery. In spite of higher smoke stacks the air pollution seems to grow worse and worse, but our Milieudienst seems powerless or worse.
Shell Liability
or, when lawyers disagree
|
When Shell sold
the refinery to Curaçao island, an explicit condition was that the oil
giant did not accept any liability for any damages resulting from their
operations. It was a bit surprising, then, that the Stichting Humanitaire Zorg
[Humanitary Care Foundation] approached the Antillean Government in
2005 with a warning that all Shell's liabilities would expire on October
1, twenty years after the contract was signed. [But what liabilities?]
We did not learn about PM IJs' reaction before October 5, when newspaper Amigoe informed us that:
- IJs had referred the matter to the island government
- he mentioned how Shell had been granted a safeguarding against all liabilities
- he claimed Shell's liabilities would not expire before thirty (not twenty) years had passed.All this information is so confusing and self-contradictory, only this seems sure - no consolation at all it seems very sure:
Shell will never have to answer to any liability they may, or may not, have
neither is the Antillean, nor the Curaçao government, willing or able to clean up the mess left behind
which will only get bigger before oil refinery operations finally, inevitably, grind to a definite halt |
Power and Money
A
downright dangerous aspect of the Venezuelan take-over is the power
Venezuela can exert over Curaçao. With the 1982 Falkland crisis, the
Dutch immediately sent over a Navy squadron to keep Venezuela from
getting any ideas.
If not for our relation with Holland, we'd already be completely in
Venezuela's power. If they decide, because of a whim, to close down our
refinery we're stuck. During the 2004 semi-revolution against president
Chavez, the Venezuelan oil could be kept flowing to the USA only because
of the enormous supplies available in Curaçao. Gasoline was even
shipped back to Venezuela, so you may think they'd be cutting in their
own flesh. But the old PdVSA staff later was largely fired by Chavez,
and who knows what sort of bumbling fools he replaced them with? (Now
the director of PdVSA is Chavez' full nephew, anyway.)
Google Earth Isla
Pollution vs Tourism
In the 1990s, the Curaçao government decided that the economic future of the island was Tourism.
In this vision, they forgot that not very many tourists may care to
visit a place that's still utterly dominated by a gigantic oil refinery.
Unlike in Aruba, you just can't miss it. Then, a plume of smoke that
reminds you of the German Ruhr Valley at its top extends for many miles
over the sea, where you can enjoy looking at it from almost every beach.
After
2000, the population of the island began protesting mildly against all
this. A 100m high smoke-stack was built (twice as high as the older ones
- that, by the way, look like they're still in use, regardless) in the
hope that the wind would carry the rubbish back to Venezuela where it
came from. No such luck. It took until early 2005 before protests got
serious enough to get some official reaction.
At the same time, the insight grew that the Schottegat,
the inlet extending from Willemstad harbor where the refinery is
located, would be a really fine tourist trap—if only there was no
refinery. There is much more other industry around there than your
median tourist would like to see, anyway, but removal of the refinery
would go a long way. More arguments are that this would make us less
dependant on Venezuela's caprices. What really started the discussion
going was when in February of that year several schools had to send
their pupils home because of refinery air pollution.
Two weeks later, Milieudienst announced that they (finally) had
inspected the refinery. Many leaks had been found and fixed. Isla is
even supposed to clean up the Schottegat crude oil pollution, which has
been allowed to accumulate ever since CPIM started operations.
Wear and Tar
The problem seems to be that PdVSA is just exploiting the refinery,
hardly investing in new equipment and only fixing defects that actually
interfere with production. Duraco N.V., a company set up way back when
by Royal Shell/C.P.I.M. for Isla refinery repair and maintenance work,
went bankrupt in 2005 because there just was no more work forthcoming.
Meanwhile, PdVSA is blackmailing the politicians with frightening
threats to leave us if we become nasty. After Chavez in 2004 put in mere nincompoops
as replacements for 90% of PdVSA staff all bets are off: production has
halved since then. That such a move might leave both Venezuela and us
in an awkward position never really counts for politicians, not even,
especially not, for dictators like Chavez. Look at all the stupidly
short-sighted decisions Hitler made, digging his own grave (and, not
incidentally, many more).
Refitting the refinery probably will turn
out to so expensive it's not worth it. If it is, certainly the Antillean
government can't afford it, let alone the island government. It looks
like we would be dependant on PdVSA's fancy to have the refinery brought
back up to date. If they don't we will even lack the money to demolish
the works and can say good-bye to a large part of harbor activity as
well, being left with one or two ships a week, if that, bringing
tourists to have a look at the romantic ruins.All
this may, thus, finally lead to a stop of Isla refinery activities.
This would effectively end all discussions, except those about colonialism
and independence
.
Royal Shell would never have given in to this sort of blackmail
(knowing far too much about oil refineries, bribery and blackmail
themselves.)The entire post-Shell history is yet another instance of
the clumsy impotence of our successive governments
in dealing with serious matters.
The Future of the Refinery
More Smoke Screens |
International energy consultants Purvin and Gertz, at the request of Curaçao island government, prepared a report on the future of Isla refinery. Their instructions, controversial to start with because no other tenders were invited and because Purvin and Gertz already are consultants for both Isla and PdVSA,
were to study the technical state and future possibilities, including a
preliminary budget for recommended adaptations. All options were
supposed to be looked at: To keep on running the refinery, to close it
down or to continue in another form.
When in October 2005 their final
report had been presented, there had been a change of government and
FOL deputy Caldera, who himself formerly held an important maintenance
function with the refinery, announced the results of the report would be
kept secret, because too much company information would become public and it would endanger the strategic negotiation position . Refinery director Mensche also declared certain sensitivities would cause parts of the study being kept secret.
Apart from the question of how well this fits in the oft-proclaimed transparent government our leaders are so fond of going on about, Foundations SMOC and Humanitaire Zorg
both are worried that this endangers the environmental and public
health aspects related to the refinery's future. They might well be. So
are we all.
|
Good News? Or, Maybe...According
to a report (May 2006) there's oil in the Caribbean Sea near Curaçao
and Bonaire. Also near Aruba, but we knew that already. This, if true,
blows all our chances of getting rid of the refinery in the near future.
Our Leaders will be delighted, if not necessarily for exactly the same
reasons that the news might be welcome to us. There's a fly in the
ointment, though: 35% of the proceeds belong to the country (the
Netherlands Antilles) against 65% to the islands of Curaçao and Bonaire.
If
you are curious about the in-fighting that may result and the effects
upon the independence wishes of the other islands now still part of that
country, so are we.
Also the remark in the same report that
exploitation cannot be allowed to harm the health of the population
makes one think: Why should this make the present attitude change?
Venezuela,
which country surely must have been aware of the fact there was oil in
them thar reefs long before we had the merest inkling, changed its tune
immediately. Sure, PdVSA is now prepared to change the contract with
the refinery all of a sudden. Yes, PdVSA is quite aware Isla refinery
has to be renewed, and certainly would not mind sharing the cost! After
all, that's only reasonable.
Beware:
They smell Crude Money.
But, as Vereniging Bedrijfsleven Curaçao stated, all this is very premature:
Is there any oil at all?
Another Oil War?
There is some seriously sounding talk about a possible war between the USA and Venezuela, all about oil. Several things are
for sure: Apart from having elected Bush the Warmonger for president,
the USA have been building Forward Operation bases (FOLs) with trimmings
on Curaçao and Aruba; one seems not to be enough to protect two
refineries (officially, they serve to combat the drug smuggling trade).
Venezuela dictator Chavez, who'll be in power until 2015, is rumored to
have ordered 200,000 assault rifles
from China recently (and than some). In the fine old dictator
tradition, he is telling the people they have a common enemy - in this
case the USA, their principal customer. And we all know president Bush
isn't exactly what you'd call a dove, either.
Wouldn't be the first time a war was started over oil, and this time going boom
might mean just that for us.
Between a rock and a Hard Place
The deal made by some politicians on leasing the
Isla refinery to PdVSA, which left some of us wondering how much money
had passed to whose hands, is getting ready to blow up in our faces like
a volcano. A secret
report was leaked to Amigoe newspaper. Sparing you all the ugly details, this is what it all boils down to:
- The shutdown of Isla refinery, inevitable in the long run, costs $400M; this amount has to kept in reserve.
This is the least cost option.
Which option happens to be the absolute criterion Refineria di Korsow and Isla base their decisions on; as Norbert George was kind enough to remind me, we might do well to apply the same criterion.
- The financial position of owner Refineria di Korsow will become critical in 2011
- Isla needs to invest $1G or the plant will become obsolete in or before 2019
- Borrowing money is impossible: Installations cannot be used as security as PdVSA has all rights of use as leaser
- PdVSA will not be interested in buying - not with a lease contract expiring in 2019
- Selling Isla to a third party will result in a claim by PdVSA
Venezuela News and Views
Now Bestuurscollege wants to renegotiate the deal with PdVSA - but why would PdVSA want to? They're sitting pretty!
If you know a way out of this dilemma, you surely know more than our Leaders do. So, better watch PdVSA!
| PdVSA wants to renegotiate |
In June 2006, it turned out that PdVSA does
want to renegotiate the lease, and extend it until after 2019. An $400M
investment is necessary; not only to keep the refinery running, but
also to reduce pollution and to improve the grade of its products.
(This unexpected turn-around may also be inspired by enormous low-grade
oil deposits in the Orinoco area for which more refining capacity will
be needed.)
PdVSA feels the $400M should be shared, as the lease
contract dictates, on a 50-50 base by them and Curaçao island, because
this concerns pollution.
However, as part of that amount will be spent for other purposes it is
not at all clear if Curaçao really has to come up with half of it.
Another
consideration is that Venezuela probably needs the Isla refinery more
than ever in the future, so this is the time to try to make PdVSA change
its tune. |
No surprise
It
was no real surprise when PdVSA director suddenly reacted to several
requests and even an ultimatum, to visit Curaçao for negotiations on the
Isla refinery. The refinery is in deep trouble and, with a yearly
inflation now over 10%, Chavez' arms build-up as if he were planning
WW-III, and his oil sales at discount prices this can only grow worse.
The new Orinoco oil fields need heavy extra refining capacity in the
near future.
Granado figures an investment of 1.3G to 1.5G dollars for a technical
upgrading and decreased pollution. PdVSA already has a concept agreement
for a cooperation with Isla.
What is surprising is that only a few months ago PdVSA claimed they had no money at all for upgrading, and that somewhat later
they offered a 50-50 deal on a 400M upgrade. As we remarked before,
Curaçaos negotiating position must be much stronger than PdVSA lets on.
Alas, with our bumbling politicians there's no hope they're able to use that advantage.
asphalt lake (Google Earth)
When Politicians Deliberate
Finally, in June 2006, our island government Bestuurscollege
found the time to discuss this probably most important point for the
future of Curaçao, independent or not. As was to be expected, the
discussions were replete with interest. They all agreed we should try to
make more money from the refinery; what took them so long?
SMOC
may have had more influence than they could hope for. Deputy Davelaar
stated that the refinery in its present polluting form has no right to
exist; FOL member Carolina informed us how he recently learned from the SMOC court case
that the refinery has caused illness and death. Where has the guy been
all those years? His idea was, PdVSA should give us sports fields.
Evertsz (not Mario, Dennis) proposed to replace the refinery fence with a wall and greenery.
At any rate, deputy Hernandez failed to give any answers. The 'delicacy
of the negotiations' with PdVSA prohibited this. He said. He asked for a
postponement until June 27. One thing he could confirm was, that when
SMOC wins the case in court and the refinery has to shut down, PdVSA
will sue the island for damages.
To put it in a nutshell, here are several options to continue Isla exploitation:
1. Clean up the refinery so it can go on processing by using higher-grade fuel; costs $165M.
2. Put extra scrubbers in the smoke stacks to catch SO2; $150M more.
3. Invest in new installations to produce a higher grade product; over $1G.
However, there are other options, not mentioned in the report. The most profitable solution, according to Purvin & Gertz,
is to look for a financial partner; several are mentioned, among which
Brazil's Petrobras and Trinidad's Petrotrin. Even Shell Oil is
re-establishing a foothold in Venezuela; while possibly they may have
changed their imperialist stripes, this does show up Chavez for the
opportunist he is.
PdVSA has let it be known
they lack the funds to invest $1G. Rather curious; but anyway, PdVSA
financing this inevitably would result in Curaçao losing all
such limited power over Isla it as yet still has. Once more, it is
important to realize that P&G are also advisers for PdVSA, no doubt a
very important customer, and their 'advice' should be taken with a
sackful of salt. Especially since that most expensive option would
prepare the refinery for processing the heavy crude Orinoco deposits.
| The Hard Facts? |
Purvin and Gertz reported before (Curaçao refinery Strategy Study, Valuation and Investment Alternatives
that the value of the refinery was between $295M-490M. Not bloody
exact, is it? Also, they did not consider the installations' condition
too deeply, as the technical life-span is due to run out in the coming 4
years anyway; just stated that 'minimal investment' needed is
$156M-303M, while an upgrading will cost at least $1.1G. (Such an
upgrading would result in a minimum of 10 premature deaths in every of
the coming 10 years.)
It seems Venezuela is willing to invest $1.5G in return for 49% of the Isla Refeneria di Korsou RdK shares. RdK seems not overly enthusiastic about this offer but suggests a third partner - like Shell, which PdVSA declines.
All
this should have been discussed between Curaçao, RdK and PdVSA on
December 14, but because of the Venezuelan elections that meeting was
postponed. The idea now is it will take place next January.
All this
according to Pierre in December 2006. Another taxation and evaluation
has been contracted for by Curaçao by an as yet unknown company, rumored
to be ABN-Amro Bank, also active in Cartagena-Colombia.
|
Another option
As the island government members have not read the Purving and Gertz report, Humanitaire Zorg plans to present them with a copy, so they will be informed for the next meeting (27 June 2006). Humanitaire Zorg
figures that selling Isla installations (~US$350M-500M) and Isla
terrain (~US$500M) covers dismantling and rehabilitating the refinery plus
renovating Curaçao Oil Terminal, and results in thousands of worker
years. Presently there is 1 Isla worker per 4400 square meters (a soccer
field).
In October 2006, after a Venezuelan delegation
visit to Curaçao, PdVSA announced that they 'want to' invest ANG1.5G in
the refinery and ANG400M in 'the environment'. On (at least) one
condition: that PdVSA will become a shareholder in the refinery. They do
not tell us how much of a share they expect to get in return. Pierrot is all for this ominous development.
October 2006, no wind:
umbrella of smoke over Willemstad
| ANG28,000,000/year in damages |
This has been figured by consultant Ecorys
on the government's request as the yearly damage caused by Isla. Ecorys
remarks that their own report is not very reliable, as nobody even
knows exactly what poisons Isla spreads; only CO2 and particles are taken into account. But Ecorys omits to consider hard results of solid earlier research.
Based on this one-sided and limited-vision report, government, Isla and
Curoil have started to make prognostications on the future of the
refinery and how much should be invested in it. This while Ecorys'
report even disdains to look at the damages to infrastructure, private
property, environment and nature; and the effects on tourism at
Piscadera and Bluebay.
SMOC reacts that with this report a self-deceiving con-sell will be used as the base for long-term planning of which the next generations will be the culprits: If even with an US$1G investment today's pollution norms will not be met for the next 25 years, the barrios downwind of the refinery should be de-populated - this looks like the only way to comply with the judge's verdict.
|
| Venezuela and its Constitution |
After, in August
2006, the island government had unsuccessfully tried for a month to get a
response from Venezuela on opening negotiations about the future of
Isla refinery, the Antillean government had another fling at it. They
expected Venezuela to lend this 'more important' institute its ear
sooner; we're not so sure - very soon afterwards Venezuela energy
minister Ramirez contacted island government. But an official response to the ultimatum was not forthcoming, so the Antillean government announced it would request Kindom minister Bot to approach Venezuela.
Another
factor is that in the 1999 constitution Venezuela is required, in
several indicated ways, to take care of the environment. Our government
thinks this applies to PdVSA's operations here. We're even less sure
about this. Judging from what's going on in Venezuela, these seem just empty phrases. As Humanitaire Zorg
rightly comments, this is extremely hypocritical on our government's
part, as we have similar commitments in our constitution without ever
having taken proper action. They might add that it also is pretty sure
to antagonize Venezuela before negotiations have even started, but
that's exactly what we can expect from diplomatic politicians like ours.
We do not have to be diplomatic, and point out that the way Chavez
grabbed power degraded that same constitution to a farce.
On August
30, PdVSA vice-president announced he would come over for discussions.
As was to be expected, Cova immediately claimed credit for this, as the
man was 'a long time friend' of his.
|
Populism
In March 2006, the Curaçao Venezuelan consul announced that the deserving poor could have their eyes fixed in the Venezuelan Hospital Militar,
all expenses paid. He would accompany them in person, on a free flight
in a military - or even presidential - plane. (He does not seem to have
much of more importance to do.)
The Curaçao eye quacks came
out immediately with a statement that those same people could have their
eyes fixed, free, right here; and that the island has the best eye care
of the Caribbean. They also pointed at the dangers of having unknown
entities operate on you.
Apart from all that, though it is
true enough, everybody would prefer Venezuela to give us all a decent
deal with our refinery. This is a mere propaganda stunt by which nobody
really profits.
(For the record: Nothing more has been heard about this - nothing at all.) |
It is a reasonable assumption that in 2050
world oil reserves will be depleted
(that's only 13 elections away)
The Wolf at the Door
that is not necessarily a scenario of Doom to the World
but it does mean oil refineries will be finished before then
