What is the Curacao Rustbelt?
When you fly into Curacao, you may have noticed the rust belt of abandoned oil tanks. Curaçao's Refinery was the cornerstone of the island's economy since its establishment in 1918 by Royal Dutch Shell. Over the decades, it played a pivotal role in processing Venezuelan crude oil, significantly contributing to local employment and economic activity. However, a confluence of economic, environmental, and geopolitical factors led to a slow unwinding of this business. Here is some background.
Economic Challenges and Operator Transitions
In 1985, facing global overproduction and declining profits, Shell sold the refinery to the Curaçaoan government for a symbolic amount. The government subsequently leased it to Venezuela's state-owned oil company, Petróleos de Venezuela, S.A. (PDVSA), under a 35-year agreement. This partnership sustained operations for several decades. However, as the lease approached its end in 2019, PDVSA faced significant challenges, including U.S. sanctions and internal economic turmoil, leading to a decline in its operational capacity. Consequently, the refinery's operations dwindled, and the facility fell into disrepair.
Environmental Concerns
Throughout its operational years, the Isla Refinery was a significant source of pollution on the island. Emissions from the facility were among the highest globally, leading to health issues among local residents and environmental degradation. Despite legal actions and public outcry, meaningful interventions to mitigate the pollution were limited. The refinery's closure brought a notable improvement in air quality, highlighting the environmental impact of its operations.
Attempts to Revitalize the Refinery
In the aftermath of PDVSA's departure, the Curaçaoan government actively sought new partners to revive the refinery. Negotiations were initiated with various entities, including a notable attempt with the US-Brazilian consortium CPR. However, these talks collapsed in early 2023 due to concerns over the authenticity of financial documents provided by CPR, casting doubt on their capability to manage and restart the refinery.
Future Prospects
As of early 2025, the future of the Refinery remains uncertain. The government has expressed intentions to reactivate the facility, recognizing its potential to generate employment and boost tax revenues. However, challenges persist, including the need for substantial investments to modernize the aging infrastructure and to comply with environmental standards. Additionally, there is a growing discourse on diversifying the island's economy, with an emphasis on sustainable tourism and financial services, to reduce reliance on oil refining.
