The U.S.-based refining firm in June received approval from Aruba's government to refurbish, restart and operate the 235,000-barrel-per day idled refinery and an attached terminal under a 25-year lease contract.

The importance of Aruba as a facility to be used by PDVSA and its subsidiaries has increased in recent weeks since the parent company could be forced out of neighboring Curacao, where it currently operates the 335,000-barrel-per-day Isla refinery and a storage and blending terminal.

Aruba and Curacao are strategically located in the middle of the route from Venezuela to the United States or Europe, and PDVSA needs facilities in the area to process and store its oil before it is exported.

Citgo, which had planned to start the renovation project in August, has faced delays due to last minute disagreements between the government of Aruba and the facility's previous owner, U.S. Valero Energy (>> Valero Energy Corporation), two sources close to the talks said.

Lack of capital has also contributed to the delays. PDVSA has this year focused on paying foreign debt and its PDV Holding unit has not yet transferred the $100 million loan to Citgo, according to one of the sources. In the meantime, Citgo is trying to raise private financing for the restart.

"We are looking for project or construction financing from any financial entity, major market player or policy-based financial institution," the document, written in August, said.

Citgo and Valero declined to comment. The Government of Aruba did not respond to requests for comment.

The company's Citgo Aruba Refining unit expects to receive bids on Thursday for the restoration project, the sources said. The first of two crude units would be restarted in mid-2017.

STEP BY STEP The whole project would be finished by mid-2018 and turn the crude distillation units into crude upgraders capable of converting 209,000 barrels per day (bpd) of Venezuelan diluted crude oil (DCO) into some 90,000 bpd of a medium crude of 22 API degrees of density and 0.98 percent of sulfur content, the document said.

The upgraded oil will be almost entirely exported to Citgo's refineries in Lake Charles, Louisiana and Corpus Christi, Texas.

Citgo Aruba Refining also expects to produce fuels for the island's domestic market and some 60,000 bpd of naphtha for PDVSA, which uses this product to dilute its extra heavy oil, according to the document.

Citgo expects to sign a new supply contract with PDVSA to lift diluted crude oil at Venezuelan ports. The companies estimate the Aruba refinery will generate a cashflow of some $220 million per year, the document said.

IN NEW HANDS

The transfer of the refinery and its terminal to Citgo was initially planned for early September, but a termination agreement between the government and Valero has taken more time than expected to be finalized, one of the sources said. Aruba's government and Citgo are also waiting for the island's parliament to give final approval to the deal.

"There have been disagreements related to the transfer of the terminal. Aruba also wants to make sure the island will receive enough refined products from the refinery," the source said.

In the meantime, six consortia of private contractors interested in the revamp have formed in recent days, according to the sources.

The consortia include Venezuela's Vepica, Tecnoconsult, Tivenca, Den Spie and Inelectra, Spain's Pentech, France's Technip (>> Technip) and Japan's JGC Corporation (>> JGC Corp), which were recently pre-qualified.

(Reporting by Marianna Parraga in Houston; additional reporting by Erwin Seba in Houston and Sailu Urribarri in Aruba; Editing by Phil Berlowitz and Andrew Hay)

By Marianna Parraga

Stocks treated in this article : Technip, Valero Energy Corporation, JGC Corp