By Mircely Guanipa , Tibisay Romero and Deisy Buitrago
PUNTO FIJO/EL PALITO, Venezuela, July 29 (Reuters) - The Paraguana Refining Center in Western Venezuela once symbolized the country's oil wealth and its ambition to turn vast crude reserves into fuels and export revenue.
Today, the 955,000-barrel-per-day complex in Falcon state runs at a fraction of capacity, a decline decades in the making and unrelated to the strong earthquakes that struck Venezuela last month.
In the months before the quakes,
Reuters visited the area surrounding the Amuay and Cardon refineries that make up the Paraguana complex, along with one of Venezuela's other two active refineries, and interviewed four dozen workers, contractors, residents and experts.
One worker at the 645,000-barrel-per-day (bpd) Amuay refinery said everything looks "ugly and rusty." Open-air waste pits are nearly full. Residue seeps across pipelines and valve stations. Workers say years of underinvestment, equipment failures and shortages have left Paraguana struggling to produce the fuel Venezuelans need.
The reporting revealed festering decay and little ongoing maintenance at all three facilities, underscoring the monumental challenges Venezuela faces in restoring its oil infrastructure to the benefit of its citizens, even as President Donald Trump promises $100 billion in investments by foreign oil companies.
Venezuela's refineries are at once among its most dilapidated assets and the most critical to Venezuelan consumers. Yet these refineries are among the least likely to see foreign investment any time soon, industry executives and analysts told Reuters.
Recovery from the two earthquakes, which killed more than 5,000 people and caused widespread destruction, has further complicated the refineries' outlook, said Oswaldo Felizzola, a Venezuelan energy analyst.
"Right now, the priority clearly seems to be rebuilding and dealing with all the devastation the earthquakes caused across the country," he said.
He said any major investments in refining would now likely be pushed into 2027 and beyond as the government focuses on oil production. Fully restoring refining capacity would require at least $20 billion, Felizzola said, an estimate echoed by other industry experts Reuters interviewed.
NEWFOUND INTEREST IN VENEZUELA
Some U.S. and multinational oil companies have expressed interest in Venezuela this year after the U.S. ousted socialist President Nicolas Maduro in a January 3 raid. But they have little incentive to rehabilitate local refineries when the U.S. has its own refineries able to process Venezuela's challenging heavy sour crude grades.
That leaves the government of interim President Delcy Rodriguez with little hope of raising money to restore refineries from foreign oil companies or the refineries themselves, which provide fuel for the domestic market at well below operating cost due to longstanding policies deepened by socialist governments.
Conditions on the ground are dire. At the Amuay refinery, for example, a flexicoking unit that once turned heavy, low-value residue into better-quality low-sulfur fuel is idled and blackened, according to workers there and a recently retired engineer.
The engineer said the plant had been stripped for parts and was unsalvageable. "If we needed a pump, we looked for it there; if we needed a pipe or an instrument, we looked there," he said.
Large oil companies remain wary of investing even in the more attractive sectors, such as crude and natural gas production. Exxon Mobil and ConocoPhillips both left Venezuela in 2007 after then-president Hugo Chavez expropriated their projects there.
Many foreign oil companies have signed memoranda of understanding related to exploration and production projects, but negotiations with the government for the final contracts are progressing slowly after a reform of energy legislation.
Asked about Venezuela's refineries, a White House spokesperson said the U.S. is not involved in rebuilding them and noted that Venezuela's oil exports recently hit a seven-year high.
Legislation approved this month, building on the country's recently reformed hydrocarbons law, created a licensing system allowing private companies to operate refineries – until now the sole domain of state-run PDVSA – and sell the fuel they produce. But analysts said the model is not attractive enough to investors, in part because it also imposes a new tax of up to 5% on refiners' gross income.
IRANIAN AND CHINESE COMPANIES NO LONGER WELCOME
Despite sitting on some of the world's biggest crude reserves, PDVSA has struggled over the last decade to produce enough fuel to meet domestic demand now standing at some 250,000 bpd.
The Paraguana complex has had no major repairs this year, refinery workers and contractors said, after China's Jiazhan Shaelion reduced its operations there. The company, one of PDVSA's main refining contractors, is finishing one pending project but has not been able to agree on a new contract with PDVSA, a Jiazhan employee said.
As it extended U.S. licenses this year to foreign firms aiming to expand or return to Venezuela, the Trump administration excluded companies from nations it considers adversaries, including Russia, China, Iran, North Korea and Cuba.
Officials from PDVSA, the Venezuelan government and Jiazhan Shaelion's Venezuela offices did not respond to comment requests.
At PDVSA's smaller refineries, the 187,000-bpd Puerto La Cruz and the 146,000-bpd El Palito, local contractors have since last year repeatedly repaired a poorly operating catalytic cracker and power supply to the facilities, five separate employees there said.
The last major repair at El Palito was executed through early 2024 by Iranian state firms. Later work to secure enough power for the refinery to operate independently from the grid proved not enough to withstand an emergency when the quakes hit in June. A key power transmission line to the refinery failed, triggering its shutdown for about two weeks. The refinery restarted in mid-July, but will be halted for major maintenance in the coming weeks, including post-quake inspections.
Some smaller repair projects had previously allowed El Palito and Amuay refineries to recover about 20,000 bpd of processing capacity each, PDVSA Refining Vice President Jovanny Martinez said at an April conference.
CRUDE EXPORTS RISE AS REFINERIES LANGUISH
The refining problems stand in contrast to crude-output gains. Since January, U.S. control of oil sales proceeds has allowed crude production to bounce and exports to rise to about 1.2 million bpd from less than 800,000 bpd.
But there has been little focus on refining.
"In the current political environment, the U.S. administration is going to be interested in seeing that oil exported," said Eric Smith, associate director of Tulane University's Energy Institute. Only when Venezuela becomes "stable and creditworthy" will larger projects get attention, including refinery upgrades, he said.
U.S. Energy Secretary Chris Wright, speaking to reporters in June, touted the ability of U.S. refineries to process Venezuelan crude.
"A large amount of that Venezuelan oil is floating into U.S. refineries," he said. "When these refineries were built, Venezuela was the largest exporter of crude in the world. Our refineries are tuned to use that Venezuelan oil."
One major obstacle to refinery repairs: cheap gasoline. Venezuela's state-owned refineries supply state-controlled gas stations at prices set by its socialist government, resulting in some of the lowest gasoline prices on earth.
Revenue from domestic fuel sales could provide a lifeline for Rodriguez's government, but only if she takes the unpopular step of raising prices. That is unlikely to happen anytime soon, with social tensions already at a boiling point because of what many feel was an inadequate response to the quakes.
(Reporting by Mircely Guanipa, Tibisay Romero, Deisy Buitrago, Mariela Nava, Marianna Parraga and Vivian Sequera; writing by Marianna Parraga, editing by Nathan Crooks and Claudia Parsons)
