Why is the refinery a problem?

The refinery contributes 8-9% of the islands GDP, its existence comes with many disadvantages. If nothing if fixed soon, the refinery will eventually become obsolete and cost more to take care of than it makes revenue. Since Curaaos Refinerys toxic emissions contract with PDVSA ends in 2019, now is a good time to start (sulfur oxide, methane, benzene) thinking about and planning what can and should be done in regards to the refinery in order to keep it relevant and allow people to get the most use out of it. Asphalt Lake, where Shell dumped excess asphalt from WWII-1984

Countdown to 2019 and the Future of Curaaos Isla Oil Refinery

By: Bridget Ringer, Shippensburg University Class of 13, Finance major Advisor: Dr. Sean R. Cornell, Department of Geography-Earth Science
Abstract: The contract between Curaao and Venezuela for Curaaos Isla Oil Refinery expires in 2019 and the future
relationship is unknown. There are contrasting opinions on what should be done to the refinery before this deadline but no one solution has been reached. Three strategic options were proposed by the European consulting company, Ecorys, regarding the refinerys future. They include: (1) keeping the refinery at its current location, (2) building a new refinery elsewhere, or (3) closing the refinery entirely. This project focuses on strengths, weaknesses, opportunities, and threats for each option by conducting SWOT analyses. Factors explored in the analyses include economic cost, environmental concerns, production forecasts, and employment trends. Each option presents its own advantages and disadvantages, but any choice will have social and political implications that will impact the future of Curaao. Nevertheless failure to act on any plan could be devastating for Curaaons.

What can be done?

The refinery is a staple for Curaaos economy and if it continues to lose impact, the island could be in serious economic trouble. In order to decide upon a solution before the termination of the refinerys contract with PDVSA in 2019, three ideas have been proposed to the Curaaon government by the European consulting company, Ecorys, in regards to the future of the Isla Oil Refinery. Strengths, weaknesses, opportunities, and threats for these options are charted below in SWOT analyses.

1: Keep refinery at current location

More employment Temporary for upgrade Permanent for upkeep Higher efficiency Better financial terms with Venezuela Improved health Expansion uses after upgrade

Environmental contamination during upgrade Start-up date postponed due to clean-up from contamination Tough to estimate return for production from upgrade Strong reliance on Venezuelas oil supply

Disadvantages of refinery:
Pollution (emissions) Health issues Respiratory, premature death Inefficiency Wear and tear Operation production cost Decrease in employment [below]

2: Build new refinery elsewhere

More employment Temporary for clean-up Temporary for new construction Permanent for upkeep Higher efficiency Contamination during construction Setbacks from approving zoning laws Cost limitations Cleaning old site Constructing new buildings Additional costs to set up in Bullenbaai Better financial terms with Venezuela Expansion uses after construction Meet environmental standards Increase investor interests GDP growth from old site construction Employment at old sites new buildings Unknown return for production from new infrastructure Strong reliance on Venezuelas oil supply (not as large as option 1)

Background

3: Close current refinery

In order to close the refinery I would need another economic pillar that would replace the 8% to 9% GDP that the refinery represents - Gerrit Schotte, Curacao Prime Minister
More employment Temporary for clean-up Contamination during construction Employment from clean-up offset by amount of laid off employees Cost limitations Cleaning old site Constructing new buildings GDP growth from new buildings Employment at new buildings Low interest in building on refinery site due to waiting Reputation of old refinery tarnishes investor interest in new buildings Current investors wont be interested Finding GDP replacement

1499: Spaniards arrived to Curaao 1634: Dutch West India Trading Company took over 1662: Slave trade began 1863: Slavery abolished 1914: Oil discovered in Venezuela 1918: Oil Isla Refinery constructed by Royal Dutch Shell 1985: Refinery sold to Curaaon government and then Petrles de Venezuela S.A. (PDVSA)

Strategic options for the future of Isla:

Option 1: Upgrade the refinery by 2019 and maintain its current location. Option 2: Close the current refinery by 2019 and build a new refinery in a different location (suggested place is Bullenbaai Terminal). Use the old location for construction of*: (1) industrial buildings, (2) residential buildings, (3) tourism/offices. Option 3: Close the current refinery by 2019 and use the land for construction of*: (1) industrial buildings, (2) residential buildings, (3) tourism/offices. *Assume only one land use will be selected although a combination of either is more pragmatic.

Conclusion
Based upon the SWOT charts above and the rankings of the evaluated factors or each option it can be said Option 2 is the best option. Strategic option 2 consists of closing the current refinery by 2019 and building a new refinery elsewheremost likely at Bullenbaai. The old site would be used for construction of either industrial buildings, residential buildings, or offices and tourist attractions. Although there are more weaknesses and threats with Option 2 than other options, the impacts of strengths and opportunities appear greater than those of other options and outweigh this options negative impacts. Therefore, Option 2 is the best choice for what direction the government should take in regards to the refinery as the 2019 contract expiration approaches.

Location of Curaao Current aerial view of refinery Oil deposits in Venezuela

Future potential location of refinery in Bullenbaai

Scale used for rankings below: 1=weak, 2=weak/moderate, 3=moderate, 4=moderate/strong, 5=strong

Fast Isla Oil Refinery facts:

Second largest refinery in Caribbean 320,000 barrels per day (116.8M barrels per year) Represents ~9% of Curaaos GDP $407 million (2008) Oil production makes up 90% of Curaaos exports Contributes .35% of refined oil to world Processed oil sold as gasoline, diesel, and kerosene Ranks 24th in refined petroleum product imports [right]

Acknowledgements and References:

Future potential location of refinery in Bullenbaai I would like to thank Dr. Cornell, Dr. Jantz, Dr. Drzyzga, and the students that participated in the study abroad trip to Curaao in January 2013 for their contributions to my research. Photos modified from Google Images.
Central Intelligence Agency. (2013, January 10). The World Factbook: Curacao. Retrieved from http://1.usa.gov/jjJ9QJ Ecorys. (2011, January 31). A sustainable future for curacao. Retrieved from http://bit.ly/176UEpa Grainger, S. (2012, March 13). Caribbean island curacao faces oil refinery dilemma. Retrieved from http://bbc.in/xUIkli Refineria di korsou. (2009). Retrieved from http://bit.ly/15knlRe