Caribbean island Curacao faces oil refinery dilemma

Willemstad - the capital of Curacao The Dutch heritage is visible in Curacao's colourful capital Willemstad

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Curacao is the paradise island of many a holiday brochure.

Its pristine white sand beaches and turquoise sea coupled with excellent diving and a historic capital listed as a Unesco World Heritage Site make it a stop on many Caribbean cruises.

But there is a blot on the landscape of this small nation: a huge oil refinery that sits at the heart of the island in a natural deep water bay called Schottegat.

"The air is contaminated and there's a terrible smell of sulphur," says Edgar Leito who set up a campaign group to protest against the continued use of the refinery.

He would like to see the oil installations torn down and the bay redeveloped with hotels and resorts.

Curacao attracts around 340,000 visitors a year and tourism is by far its biggest foreign currency earner. But that has not always been the case.

When oil was discovered in nearby Venezuela at the beginning of the 20th Century, Curacao was still a Dutch colony.

Dutch oil company Shell took advantage of the proximity of the island to build the Isla oil refinery there during World War I.

Safely removed from political turbulence in South America, Curacao also boasted the perfect deep water harbour.

Archive photo from 1940s/50s of Willemstad with the oil refinery in the background. Photo courtesy Dan Jensen The oil refinery at work at the top of this photo of Willemstad some 60 years ago

Schottegat is reached through a narrow channel beside which cluster the candy-coloured historic Dutch houses of the capital, Willemstad.

An ingenious pontoon bridge connecting the two sides of the city swings into and out of place.

This allows tankers and other large vessels to make their way up the channel to the wide bay which sits right in the centre of the island and is dominated by the Isla refinery.

Lawsuits

Start Quote

In order to the close the refinery I would need another economic pillar that would replace the 8% to 9% GDP that the refinery represents”

End Quote Gerrit Schotte Curacao Prime Minister

Shell remained on the island for decades and became a major employer, especially in the 1950s and 1960s when the number of jobs at the refinery topped 10,000.

"The company was completely integrated into Curacao," says Mr Leito who worked at the refinery for 39 years.

"They built houses and really involved themselves in the society."

But the company pulled out in 1985, leaving the government to lease the Isla refinery to the Venezuelan state oil company, PDVSA.

The current contract runs until 2019 and some, including Edgar Leito, do not want to see it renewed.

PDVSA pays little rent and there have been several complaints about air and water pollution which have led to lawsuits.

Prime Minister Gerrit Schotte says Curacao, which became an independent nation within the Dutch kingdom in 2010, is about enter into talks with the Venezuelan government over the future of the refinery.

map

A study published in January 2011 by Ecorys, a Dutch consulting company, set out three future scenarios - upgrading Isla, building a new refinery at a different site or closing Isla and redeveloping the land.

"You have to think about the future and be broadminded," the Prime Minister told the BBC.

"But in order to the close the refinery I would need another economic pillar that would replace the 8% to 9% GDP that the refinery represents."

Mr Schotte says part of the negotiations over the refinery could include better access to cheap fuel for Curacao itself.

Oil trade

Prices at the pumps on the island are approximately $1.30 (£0.80) per litre, about 25 times higher than in Venezuela where petrol is heavily subsidised.

Unlike other Caribbean nations, Curacao is not part of Venezuela's Petrocaribe project.

Under this oil is made available through long-term financing agreements and some nations even pay for Venezuelan petrol using other goods like rice and bananas.

"As hosts of the refinery we have a different relationship with Venezuela than those countries," Mr Schotte says. "We'll be looking to negotiate on that."

Tanker in Willemstad Tankers dwarf historic Willemstad as they pass through on their way to the refinery

The future of the Isla contract will be important for PDVSA too. The refinery produces 340,000 barrels of oil a day for shipment onwards to the US and South America.

They can ill afford to lose the use of such a convenient facility but an upgrade would be a costly investment.

Many Curacaons are pragmatic about the refinery, seeing it as just another foreign visitor with whom they must share their island in order to make money.

"People who have to live right next to it don't like it," said one man who drives past the refinery every day. "But it's a big part of our economy."

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