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Chinese Firm May Expand Limón Refinery

December 14, 2007

Costa Rica is on track to expand its petroleum refinery with the help of a Chinese oil company. The broad goals are to triple the refinery’s output and increase its quality.

Officials said the collaboration could also lead one day to offshore oil exploration by the Chinese company called the National Oil & Gas Exploration and Development Corporation (CNODC).

Top company officials visited Costa Rica last week to form an exploratory committee with their Costa Rican counterparts.

“The framework agreement we signed in October is now a reality,” said National Oil Refinery (RECOPE) President José León, referring to an accord between China and Costa Rica signed by President Oscar Arias. He added: “This initiative has the green light.”

The state-owned refinery in Moín, north of the Caribbean port city of Limón, provides only about 30% of the roughly 1.6 million barrels of petroleum products consumed in Costa Rica each year, according to the RECOPE press office.

Minister of Environment and Energy Roberto Dobles said the purpose of expanding the Moín refinery would be to “meet the national demand,”which is estimated to rise to about 60,000 barrels per day (bpd) in the near future.

Currently, the refinery puts out about 18,000 bpd, Dobles said.

The other goal of the refinery upgrade is to increase the quality of the fuel refined in Costa Rica by decreasing, for example, the sulfur content.

Fuel produced by the refinery now contains 0.05% sulfur, or 500 parts per million (ppm). José Rubén, a member of RECOPE’s board of directors, said the goal is to “comply with certain norms that are now being applied in (the U.S. state of) California and countries on the cutting edge.”

Sulfur content in California must be lower than 15 ppm, while the European Union is phasing in “zero sulfur” fuel standards that will require sulfur to be less than 10 ppm.

Sulfur is a major cause of acid rain and of fine-particulate pollution that can lodge deep in the lungs and adversely affect the cardio-pulmonary system.

Dobles said the expansion of the refinery and the cleaner technology to be installed will help lessen pollution in Costa Rica. He acknowledged, however, that the only long-term way to lower pollution is to drive fewer cars.

“The problem isn’t the quality of the fuel,” he said. “It’s the quantity of vehicles.”

That quantity has increased substantially in the last few years, from 734,444 registered vehicles in 2004 to an expected 889,656 next year, according to the National Insurance Institute (INS).

Drilling for Trouble

Guaranteed to cause controversy is the announcement that the new relationship could also allow the CNODC to explore for oil off Costa Rica’s Caribbean coast.

The last time a foreign company explored for oil there (in 2002) it provoked protests that ended with a multi-billion-dollar lawsuit, an executive order banning future offshore oil exploration, and a motion picture – “Caribe” – that chronicled the drama.

The environmental impact study for exploration company Harken Costa Rica Holdings ultimately was reject ed by the  National Technical Secretariat of the Environment Ministry (SETENA), a decision the Constitutional Chamber of the Supreme Court (Sala IV) upheld in 2004 (TT, Oct. 15, 2004).

Thanks to the controversy, then-president Abel Pacheco issued an executive decree banning oil exploration and certain kinds of mining.

But upon taking office in 2006, President Oscar Arias acknowledged to The Tico Times that he intends to ignore the decree, effectively reopening the possibility of oil exploration in Costa Rican waters (TT, Sept. 8, 2006).

So far, reaction to the possibility of offshore drilling has been muted. The Costa Rican Federation for Environmental Conservation (FECON) staged a small protest outside the headquarters of the Ministry of Environment and Energy (MINAE) after the RECOPE announcement.

FECON representative Mauricio Álvarez said anti-petroleum exploration activists will have to stir themselves out of slumber brought on by Pacheco’s decree against exploration.

For the moment, the group is trying to get hold of the agreement MINAE signed with the Chinese company to look at the details.

“This is a controversial decision,” Álvarez said. “It’s not one you can make unilaterally.”

Costa Rica is not alone in having received oil-related overtures from the Asian giant. China’s state oil companies – of which CNODC is one – have been aggressively moving into multinational oil exploration around the world in recent years, said David Pumphery, a senior fellow with the Center For Strategic and International Study’s energy and national security program.

Along with high-profile operations in African countries like the Sudan, Chad, and Angola, Chinese state oil companies have also begun seeking alliances in Venezuela, Ecuador and Peru.

“They’ve had a presence” in Latin American, he said, though it hasn’t been as strong as it is in Africa.

Chinese projects abroad often involve importing large numbers of Chinese workers to do design and construction, something African communities have complained about, Pumphery said.

Whether Chinese workers will be brought to Costa Rica is one of many decisions about the refinery expansion project that have yet to be made.

 

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