Downstream vision: The grand plan for LatAm's first private oil refinery

Bnamericas Published: Monday, August 12, 2019
Downstream vision: The grand plan for LatAm's first private oil refinery

Entrepreneur Germán Casas, the president of Refinería Sebastopol, tells BNamericas that the company's planned US$6bn oil refinery complex in Colombia will pave the way for a raft of similar projects across Latin America.

BNamericas: Please tell us about the Sebastopol project.

Casas: We already have a 658ha site in Puerto Berrio, a strategic location on the Magdalena river which provides access to the Caribbean coast and the center of Colombia. And it's less than 200km from Medellín. The project involves a refinery that will initially produce 100,000b/d to 150,000b/d of diesel, gasoline, jet fuel and other crude oil derivatives. In addition there will be an associated 135MW thermoelectric power plant that will generate electricity for the refinery. The rest will be sold to the market.

Beyond that, we'll be building a 100MW photovoltaic solar power plant and a hydrogren generation facility, which will cater for the growing fuel cell vehicle sector. The total investment will be US$6bn. The aim is for construction work to begin either at the end of this year or early next year, which would allow us to start operations in 2023. 

BNamericas: Could you break down the forecast investment for each part of the project?

Casas: The refinery has an estimated cost of US$5bn, the thermoelectric power plant US$400mn and the other facilities US$600mn. 

BNamericas: Who is backing it financially?

Casas: VIP Group International, which is an investment fund from the US, has committed itself to the project. Other private investors that want to participate can still do so, they have time. But we already have the financial guarantees needed to move ahead with it. WorleyParsons has been contracted for the design work and to set the working timetable. 

BNamericas: Colombia already has five refineries, four of which are operated by state-run oil company Ecopetrol. Does the local market need another one?

Casas: Yes. Houston alone has 16 refineries and they all have an important role to play. Likewise, this project is going to be beneficial for Colombia, which is a big market that has room for many players. Sebastopol is going to complement the Barrancabermeja and Cartagena refineries, not compete with them. It will give buyers a choice that they previously didn't have and that can only be a positive change for the industry.

In the end it will contribute to a more efficient market, bringing down fuel prices and allowing Colombia to stop importing crude oil derivatives.

BNamericas: Is the project insured?

Casas: Yes. We have a complete insurance package with one company that covers the entire project. That was one of our aims because separate insurance policies for all of the different facilities wouldn't have worked well. I can't tell you the name of the insurer but it [the project] is covered for the full US$6bn. 

BNamericas: What about all of the necessary permits from regulators? 

Casas: We're already on the way to securing all of the licenses that we need. We've had discussions [with government officials] and they've shown their support. This is going to bring in important investments, creating jobs and boosting the local economy. I plan to have a coffee with [President] Iván Duque to discuss the project further with him. But the government officials that I've already spoken with realize that this is a major project that can't be delayed."

BNamericas: What would your message be to any prospective investors in Sebastopol?

Casas: This is a strategic project that Colombia needs. The rules that allowed the private sector to enter Colombia's refinery sector were introduced 20 years, but it's taken us until now to finally advance with our first steps. And we're the first to open the door because you can be sure that others will follow. This will be a forerunner for other projects in the region. It will point the way for private companies wanting to invest in refineries in Mexico, Central America, Brazil, Argentina and even Venezuela, which is going to depend on private capital when regime change occurs.

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