June 11, 2009 / 6:03 PM / 10 years ago

UPDATE 2-Valero plans to shut Aruba refinery up to 3 months

(Adds no other temporary shutdowns planned, paragraphs 5-6)

By Erwin Seba

HOUSTON, June 11 (Reuters) - Valero Energy Corp (VLO.N) confirmed on Thursday it planned to shut its 235,000-barrel-per-day refinery in Aruba for two to three months due to poor margins.

The shutdown was scheduled to begin in late June and the refinery would be completely offline by early July, Valero spokesman Bill Day said.

During the shutdown, Valero plans to do maintenance on the refinery’s electrical system and other work, Day said.

“We informed our employees we will begin a shutdown for economic reasons,” he said.

Temporary shutdowns are not planned at other Valero refineries, Day said.

“This is similar to the shutdown we did recently at Delaware City,” he said. Valero shut its 210,000 bpd refinery in Delaware City, Delaware, for the months of March and April.

Refinery employees would be retained with compensation during the shutdown, Day said.

Day also said the shutdown was not a tactic in the company’s long-standing dispute over taxes with the Aruban government.

“For the most part, this is due to economic reasons, especially low distillate margins,” Day said.

Near the end of the planned shutdown, Valero will review the economics of restarting operations at the refinery, he said.

When Valero purchased the refinery in 2004, it received an exemption through 2010 from taxes, but Aruba adopted a new sales tax in 2007, which Valero argues it should be exempt from also and Aruba claims the refinery must pay.

Valero has been seeking a buyer for the refinery since late 2007. A deal in early 2008 with Brazil’s state-owned oil company Petrobras fell through after a fire at the refinery.

Early this year, PetroChina, Asia’s top oil and natural gas producer, was said to be interested in the refinery, along with Columbia’s state-run oil company EcoPetrol and Petrobras.

The refinery cannot produce finished motor fuels, but makes mid-stream products that are shipped to U.S. refineries for completion.

The inability to make finished products is considered one of the reasons Valero has been unable to sell the refinery, according to brokers of refining assets. (Editing by Marguerita Choy)

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