Exclusive: Venezuela refinery could restart Friday

PARAGUANA, Venezuela Mon Aug 27, 2012 6:53pm EDT

1 of 11. A column of smoke rises as fuel storage tanks are seen on fire at Amuay oil refinery in Punto Fijo in the Peninsula of Paraguana, August 27, 2012.

Credit: Reuters/Marife Cuauro

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PARAGUANA, Venezuela (Reuters) - Venezuela's biggest refinery could restart operations on Friday and fires still burning in three storage tanks will be extinguished within two days, the country's energy minister told Reuters, following the country's worst oil industry accident.

An explosion on Saturday at the Amuay refinery killed 48 people and pushed up U.S. fuel prices in markets that were already bullish because of a threat that Tropical Storm Isaac could disrupt refinery operations on the U.S. Gulf Coast.

The fire spread to a third storage tank on Monday, forcing authorities to shelve plans for quick restart of the 645,000 barrel-per-day facility.

"We are going to extinguish the first of the tanks either today or tomorrow; then we'll continue working on the other two, which should burn themselves out in two days," Energy Minister Rafael Ramirez told Reuters in an exclusive telephone interview.

"The (production) units at Amuay will restart about two days after that, approximately on Friday."

He said Venezuela currently had no plans to import fuel, and that today's rise in U.S. gasoline prices would not last.

State oil company PDVSA was no longer looking to hire floating storage in the area, the minister added, because Amuay still had enough working storage capacity.

The blast has spurred fresh criticism and claims of mismanagement by PDVSA.

Reuters witnesses said fire trucks surrounded the third tank to spray it with foam, and authorities began evacuating nearby homes and escorting journalists away from the searing heat of the scene.

Traders say the impact on fuel markets may continue even once Amuay is up and running again. Tank farm accidents often cause problems with gasoline blending, which means PDVSA may have to boost imports.

U.S. gasoline futures were up about 2.5 percent at $3.15 a gallon on Monday afternoon.

The blast ranks as one of the most deadly oil industry accidents in recent history, nearing the toll of the 1997 fire at India's Visakhapatnam refinery that killed 56, and topping the 2005 blast at BP's Texas City refinery in which 15 people died.

CHAVEZ UNVEILS AMUAY FUND

The accident has added a sour note to President Hugo Chavez's re-election campaign, pulling him away from his usual schedule of exuberant rallies and ribbon-cutting ceremonies.

"There must be a serious and transparent investigation, out of respect for those who lost their lives," said his election rival, opposition candidate Henrique Capriles. "The state must assume its responsibility and give answers."

But it does not look likely to be major issue in the October 7 election, which polls broadly show Chavez winning.

During a second visit to the area in as many days, Chavez said on Monday that he was creating a fund worth about $23 million that would help pay for clean-up operations and replace homes wrecked by the pre-dawn blast.

Chavez said 60 new homes were ready for affected families to move into, 60 more would be finished soon, and a further 137 houses would be handed over next month.

Meanwhile, PDVSA has sent vehicles to move residents and their belongings to safety, while providing food and water as well.

Neither Chavez's government nor PDVSA is likely to face legal fallout over the accident because his allies closely control regulatory agencies and the justice system.

PDVSA's frequent refinery incidents have rarely drawn sanctions from the environment or labor ministries.

That contrasts with what BP faced after the Texas City blast, which triggered a case that pitted U.S. government regulators against the British oil company.

Chavez has promised a full investigation and a 50-strong team of officials has been appointed to get to the bottom of the accident. He has rejected claims that the gas leak began days before the blast, and PDVSA officials have denied that a lack of maintenance played any part in the incident.

Ivan Freites, a union leader at Amuay, accused PDVSA's management of playing down the scale of the disaster. His union has been calling on the company for years to improve safety standards across its installations.

"This could have been avoided. They are trying to make it look like leaks are something normal, when there are lethal gas detectors in refineries ... and workers must carry detectors," Freites told Reuters.

(Additional reporting by Sailu Urribarri; Writing by Daniel Wallis, Brian Ellsworth and Steve Orlofsky)

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