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Venezuela Battles Flames at Largest Refinery After Deadly Blast

Published: August 27, 2012 | 8:20 am
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Firefighters in Venezuela are battling flames at two storage tanks at the country’s largest refinery for a third day after a gas explosion Aug. 25 killed at least 39 people and injured dozens, shutting down the Amuay plant.

There was no structural damage to the processing units at the facility about 240 miles west of Caracas, and production will resume within two days after the fires are out, Oil Minister Rafael Ramirez said yesterday. Venezuela has 4 million barrels of inventories of gasoline and other petroleum products and continues to produce a total of 735,000 barrels of gasoline a day at plants, including nearby Cardon.

President Hugo Chavez, who is in the middle of a re- election campaign ahead of October elections, declared three days of mourning and toured the affected areas. The explosion occurred Aug. 25 at 1:10 a.m. after a gas cloud formed and erupted into a ball of flames that engulfed a National Guard post as well as homes and shops in front of the refining complex. Chavez said he ordered an investigation into the causes and said they won’t discard any hypotheses.

“It’s very early to draw any conclusions from the investigation because we haven’t even been able reach the spot where the explosion occurred,” Chavez said on state television in images showing black smoke from the burning storage tanks holding gasoline in the distance. “We have to tighten the security procedures to make sure this type of event doesn’t happen again.”

Morning Blast
Stella Lugo, governor of Falcon state in western Venezuela, described the early-morning blast as similar to an earthquake and said more than 200 homes near the refinery were damaged. Paraguana, which also includes the Cardon and Bajo Grande plants, is the world’s second-biggest refinery complex.

Petroleos de Venezuela SA, as the state-owned oil producer is known, is the sole owner and operator of the refinery. The blast is among the world’s deadliest at an oil refinery. Fifteen workers were killed at BP Plc (BP/)’s Texas City refinery in 2005, while more than 50 people died in a fire at Hindustan Petroleum Corp.’s refinery in Visakhapatnam, India, in 1997.

Strong winds have complicated efforts to put out the remaining flames, which may take a maximum of two days, Jesus Luongo, general manager of the Paraguana refining complex said on state television.

Military Deaths
The national guard stationed at the refinery bore the brunt of the deaths, including 18 troops and 15 family members, according to Vice President Elias Jaua. Six bodies are unidentified. The official death toll may rise more after El Universal reported that two burn victims who were flown to a hospital in nearby Zulia state died yesterday.

Amuay, with the capacity to process 645,000 barrels of oil a day, was halted as a result of the explosion, Ramirez said. The Paraguana complex has a capacity of about 950,000 barrels a day, second in size to Reliance Industries Ltd. (RIL)’s Jamnagar refinery in India, according to data compiled by Bloomberg.

PDVSA has 10 days of inventory to meet its supply obligations internally and externally, Ramirez said.

The shutdown undercuts oil demand while reducing supply of refined products, and may widen the price gap between crude, gasoline and heating oil, a proxy for diesel, Kyle Cooper, Cypress Energy Management LP, a $20 million natural gas hedge fund based in Houston, said by telephone yesterday.

‘Big Deal’
“That’s a big deal,” said Cooper, who is also director of research for IAF Advisors, a Houston consulting firm. “If they’ve had to shut down that refinery that’s bearish for crude and bullish for products. It’s a significant loss of a crude demand.”

CRP, as the complex is known, supplies 67 percent of the gasoline to the local market, according to PDVSA’s website. Cardon and Amuay also export refined products to the Caribbean and the U.S.

The blast damaged nine storage tanks for crude and products, according to Ramirez. PDVSA may set up floating storage facilities offshore to compensate for the tanks, Reuters reported, citing a phone interview with Ramirez.

BP and other energy companies have begun suspending some crude and gas operations in the Gulf of Mexico as Tropical Storm Isaac heads toward the region. The area is home to 23 percent of U.S. oil production and 44 percent of refining capacity, according to the U.S. Energy Department.

Crude Exports
Venezuela, one of the 12 members of the Organization of Petroleum Exporting Countries and South America’s biggest crude producer, had an average output of 2.7 million barrels of oil a day last year, according to BP statistics. Its main export markets are the U.S. and China.

Venezuela was the fourth-largest source of crude oil for the U.S. in May, after Canada, Saudi Arabia and Mexico, at 821,000 barrels a day, based on data from the U.S. Energy Information Agency.

Venezuelan product imports from the U.S. nearly doubled in the first five months of 2012 to 38,000 barrels a day from 23,000 in the year earlier period, according to the EIA. They include gasoline, fuel additives and liquefied petroleum gas.

Cardon has closed units several times this year after incidents. PDVSA had to halt production and evacuate workers from its Petropiar heavy-crude upgrader last year after a gas leak and a fire.

Jose Bodas, an oil union leader who is critical of the government, told Globovision Aug. 25 that PDVSA has ignored calls by workers to improve “hazardous” working conditions at refineries.

Postponed Maintenance
Seven out of nine planned maintenance programs for the Amuay refinery were postponed last year because of a lack of materials, according to PDVSA’s 2011 annual report.

Luongo ruled out lack of maintenance as a cause of the accident, saying PDVSA has invested $6 billion in maintenance of refineries in the past three years. Chavez denied reports that the gas leak had begun hours before the explosion and that PDVSA failed to respond.

“It’s impossible that there was a gas leak as much as a day before the explosion and none of our workers detected it,” Chavez said in a nationwide broadcast late yesterday after a mass to mourn the victims.

Oil Minister Ramirez, who is also the head of PDVSA, said that an explosion took the Amuay refinery offline for nearly three months in 1984, and said that accidents are part of the risks involved in the industry.

“We’ve had incidents like this in the past; this is a refinery that’s more than 50 years old,” said Luongo. “I can mention a fire we had at a crude oil storage tank in 1989 that took three days to put out. These are normal events in the oil industry. The situation is under control.”


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