* Tax dispute seen as roadblock to potential sale
* Valero would keep refinery workers on payroll
* Valero would pay $113 million if deal approved
* Refiner would also at least $10 million in future years
(Adds details of the proposal, background on refinery, tax
dispute, paragraphs 3-14)
HOUSTON, Jan 21 Valero Energy Corp (VLO.N) said
on Thursday a framework to resolve a long-standing dispute over
taxes on its Aruba refinery had been worked out with the Aruban
government, but must be approved by that island's parliament.
A representative of the Aruban prime minister's office was
not immediately available to comment.
Executives with potential buyer PetroChina (0857.HK) have
told Reuters the dispute over the BBO tax must be resolved
before the Asian energy giant would consider purchasing the
Valero has never identified would-be buyers, but spokesman
Bill Day said discussions about a possible sale were
Under the proposed resolution framework, Valero would pay
the equivalent of $113 million to the Aruban government, Day
said, adding the company also would keep all workers on payroll
through June 1 at the refinery, which was idled last year.
In future years, Valero would make a minimum payment of $10
million per year.
The tab for the BBO tax, set at 1 percent of the refinery's
export sales and 3 percent of its Aruban sales, has been
estimated by analysts to be over $200 million.
In the third quarter of last year, Valero set aside a loss
contingency of $140 million for an eventual settlement of the
Valero purchased the 235,000 barrel per day (bpd) refinery
in 2004. The company inherited a tax holiday from certain taxes
that was supposed to last through 2010.
The government of Nelson Oduber adopted the BBO tax in
2007, at a time when refiners were reaping record profits. This
ignited a dispute that led to an arbitration battle in the
Netherlands. Aruba is an autonomous region of the Kingdom of
Aruban voters ousted Oduber in September in favor of Mike
Eman, who promised a favorable resolution to the tax dispute
with Valero, the island's largest employer. The refinery
accounted for 30 to 35 percent of gross domestic product.
Valero idled the Aruba refinery in July and called the
shutdown indefinite in August, but kept employees on the
payroll. The refinery cannot make finished motor fuels, only
intermediate feedstocks, most of them shipped to the East
Valero was hit hard by the demand downturn first as oil
prices rocketed in 2008 and then when the recession took hold
PetroChina recently took over a lease for 5 million barrels
of crude oil storage at the Statia Terminals on the Caribbean
island of St. Eustatius.
(Editing by David Gregorio)