Source: Luis Acosta/AFP/Getty Images.
In October 2023, Curaçao, an autonomous country under the Netherlands constitution with a population of 152,000 people, signed a Memorandum of Understanding (MOU) to potentially reopen its long-idle Isla refinery with Oryx Petroleum, which is partially owned by the sovereign wealth fund of Qatar. Although the deal is not complete, the lengthy odyssey surrounding the reactivation of Curaçao’s refinery is pulling the Dutch Caribbean island into a complicated matrix of geopolitics between the United States, the Netherlands, China, and Venezuela.
Oil has a long history in Curaçao, tied to the development of Venezuela’s oil industry in the early 20th century. While Venezuela had massive amounts of oil, it lacked refineries. Lake Maracaibo was then too shallow for deepwater shipping, and other coastal harbors were generally unprotected from the brisk winds that existed through much of the year. Fortunately for Curaçao, it had an excellent and protected deep water harbor, was located nearby, enjoyed political stability, and offered an easy location from which to transport refined oil to the United States and Europe. In 1918, Royal Dutch Shell built the refinery on the Isla Peninsula, where it remains today.
Curaçao’s emergence as part of the greater Venezuelan oil complex put the island on the geopolitical map, which became evident in World War Two; when the Netherlands was overrun by Nazi Germany in 1940, Royal Dutch Shell moved its headquarters to Curaçao and demand for aviation fuel skyrocketed, benefitting the island. This also brought World War Two and German U-boats to the waters around Curaçao, which were staved off by the Dutch Navy and U.S. and British forces.
Oil refining remained important to Curaçao’s economy through most of the 20th century. It was, however, increasingly overshadowed by the development of the island’s financial and tourism sectors. Moreover, competition from other refining operations (some of which were built in Venezuela) diminished the importance of the Isla refinery. In 1985, Royal Dutch Shell sold the refinery to the government of Curaçao for a symbolic single dollar.
Although Curaçao now owned the refinery, it lacked the skilled personnel to maintain it and inherited responsibility for the facility’s environmental problems. The solution was Venezuela’s state-owned oil company, PDVSA, which was contracted to be the facility operator with a 35-year lease.
In recent years, Curaçao’s refinery was important to Venezuela’s oil economy— PDVSA’s Venezuelan refineries were often unreliable—and compensated for shortfalls of gasoline and diesel. This was significant for Chinese-Venezuelan relations, as Venezuela has relied upon Curaçao’s oil to meet oil-for-loans agreements it had with its Asian financier. In 2018, this triangular relationship collapsed as Venezuelan crude exports to Curaçao were halted, reflecting the PDVSA’s long decline due to the collapse of international oil prices in 2014, the exit of skilled workers and managers, the use of the company’s profits as an ATM machine for social programs without reinvesting in the company, and U.S. sanctions on oil sales. Curaçao’s operating accord with PDVSA ended in 2019, leaving the refinery idled and falling into further disrepair.
Even before PDVSA’s accord terminated, Curaçao was actively searching for new refinery partners. In 2013, the island-state’s parliament created the Restart Committee tasked with finding new partners, and the Redevelopment Committee, which considered opportunities for redevelopment of the property around the Willemstad harbor. The second committee fit growing concerns over climate change and pollution. Indeed, there has been local opposition to maintaining the refinery, with ongoing complaints and several lawsuits charging its industrial emissions cause health problems.
Nevertheless, Curaçao’s government appears to prefer reopening the refinery. The incentives to do so include jobs, enhancing tax revenues, and postponing the large costs of any future dismantling of the refinery complex. This has become even more important considering the blows to the economy from the Covid-19 pandemic and the Russia-Ukraine War. Moreover, there is probably the calculation that despite the great energy transition, the global economy will still require oil to fuel growth and power electrification efforts. Equally important, the softening of U.S. sanctions on the sale of Venezuelan crude in return for free and fair elections in 2024 revives prospects for Curaçao to resume its global energy role.
Unfortunately, Curaçao’s history of screening companies to reopen the refinery has not been inspiring. Indeed, there has been a tangled web of geopolitics orbiting China and Venezuela. Chinese companies had earlier indicated an interest in the refinery, including Guangdong Zhenrong Energy (GZE) Company in 2016. Given Venezuela’s importance as an oil exporter to China, there was discussion of a USD 3.5 billion project to upgrade the refinery which would be partially financed by the China Development Bank.
The deal, however, floundered over a lack of transparency and disclosure in the talks between the Restart Committee and GZE. As Alex Rosaria, a freelance consultant active in Asia and the Pacific and former member of the Curaçao parliament explained: “After months of travels and conversations by representatives of the Restart Committee that were not shared with parliament, a MOU (Memorandum of Understanding) was signed with GZE to build and operate a refinery in Curaçao. The MOU was signed without any known selection criteria or process a few days before parliamentary elections in October 2016.” Rosaria also indicated that three other factors helped kill the deal. It was soon revealed that GZE had never built or operated a refinery, it had been kicked out of Myanmar for non-compliance and allegations of human rights violations, and the Chinese company misrepresented itself financially and was unable to assume such a large project. Indeed, GZE defaulted on USD 3.1 billion in bank loans in 2017.
It was in this context that Oryx Petroleum entered the scene. The company was described in the Curaçao Chronicle as “a privately-owned company incorporated in Hong Kong with planned investments in Latin America and the region.” Its registration in Hong Kong initially raised concerns that the company was a possible front for a Chinese state-owned company, with Sinopec being thought of as a possibility due to the company’s push to acquire overseas refinery assets.
The geopolitical concern over China diminished when information revealed that the player behind Oryx Petroleum was Qatar. Nonetheless, Qatar’s engagement reflects another geopolitical development—the growing involvement of Gulf State countries in the oil-and-gas-producing southern Caribbean, especially Guyana. Qatar’s speculated motivation is to retain the Curaçao refinery as a strategic asset for an expected resumption of Venezuelan oil flows into international markets.
Curaçao’s energy assets remain a potential geoeconomic value to Venezuela and could still attract Chinese companies looking to secure energy supply chains, including refineries. This raises concerns for the Kingdom of the Netherlands, under which Curaçao operates in a shared constitutional system. Under this system, Curaçao has considerable autonomy, but ultimately foreign affairs are left to the Netherlands. Relations between the Netherlands and China have become frostier as Dutch concerns have risen over the People’s Republic’s often aggressive stance, especially in terms of its economic statecraft in Europe and the Caribbean. Moreover, green politics may play a role; Rosaria noted that several potential deals (with Motiva/Aramco, Klesh Group, and Taiwan’s Chinese Petroleum Corporation) failed, with one former Curaçao Prime Minister “believing that an ‘elite’ in Curaçao and the Netherlands is exercising great influence on Willemstad to close the refinery. To achieve that, a bad candidate is deliberately chosen.”
If the Oryx deal fails, perhaps allowing another Chinese bid, the island will be a security focus for the U.S. and the Netherlands. If the deal goes through, Curaçao may find itself under fire for contributing to rising carbon levels. And much hinges on what happens in Venezuela: will there be free elections which allow the flow of oil?; will the Biden administration tighten sanctions again in response to a rigged election?; and will Venezuela try to invade Guyana? Moreover, if the deal fails, does Curaçao move toward a permanent closure of the refinery and development of its area, which raises the question of who will invest? Last but hardly least, how would the U.S. react to a Chinese attempt to gain a refinery in the Caribbean? Refinery or no refinery, there is no escaping geopolitics for Curaçao.
Scott B. MacDonald is Chief Economist at Smith’s Research & Gradings, Research Fellow at Global Americans, and Founding Member of the Caribbean Policy Consortium. His latest book, The New Cold War, China and the Caribbean, was recently published by Palgrave Macmillan. The author would like to thank Alex Rosaria for his insights and comments.
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