_citgo_

Government of Aruba

Rehabilitation of the Aruba Refinery Ministry of Economic Affairs, Communica4on, Energy and Environment July 4, 2016

General Terms

Concepts

Terms

Business Model

Lease of the Refinery, Terminals & Marine Opera4ons

Lease Payment

$10 M (annually, first three years) $18.5 MM (annually, as of year 4)

Term

FiNeen (15) years, with a ten (10) year extension

Rehabilita4on Period

As of August 1, 2016 commencement of train #1 (18-­‐24 months) followed by train #2 (12-­‐18 months).

Capacity

209,000 barrels per day

Capital Projects

All CAPEX, Environmental CAPEX and NG Infrastructure will be performed during Rehabilita4on

Opera4ons

CITGO will operate the Installa4ons

Labor Local Market

600 direct employees and 400 thru base-­‐load contractors (total employment est. 3000 max during rehabilita4on) RdA responsible to purchase product at the loading rack and distribu4on for the local market

Agreements Structure

Defini:ve Par:cipa:on A greement

Refinery Lease Terminal Lease Marine Assets Agreement Agreement Lease Agreement

Terminal Service Agreement

PDV Holding Parent Company Guarantee

Minister-­‐President Eman Land Aruba

Minister Mike de Meza Land Aruba Refineria di Aruba N.V.

Nelson Mar:nez CITGO Petroleum Corp.

Umbrella Dispute SeClement Agreement

Eulogio de Pino CITGO Petroleum Corp.

PDV Holding Inc.

Aruba Project Corporate Structure PDV Holding, Inc

USA CITGO Holding, Inc CITGO Petroleum Corp.

Service Agreement

CITGO Aruba Marine Opera:ons, NV

CITGO Aruba Holding, LLC

ARUBA CITGO Aruba Refining, NV

CITGO Aruba Terminal, NV

Lease Agreements Refineria di Aruba (RdA) NV

CITGO Aruba Supply, NV

Business Model: Aruba as EHC Upgrader Diluent Recycle 54K BPD Naphtha

54 kBPD

Diluent

Distillate

209 kBPD

EHC

DCO

VGO

125K BPD

Synthetic Crude At Desired Gravity

Vacuum Residual

155 kBPD

Current Reserves

About 300 Billion EHC & 20 Billion Conven4onal

Current Produc:on Current Upgraders

2.3 MMBPD and addi4onal Produc4on only via Upgraders Petroleum Coke Sulphur 4 at Jose Complex with combined capacity of 630 kBPD; Aruba to add another 155 kBPD.

Aruba Upgrader Cost

$700 MM vs $8,000 MM (new)

Timing

2 year vs. 6 years (new)

Refinery and Terminal Lands

Operations and Ownership Concept

Term

CITGO leases “as is where is”

Any and all pre-­‐Coastal Exis4ng Environmental Condi4ons were exonerated in 1989 (1924-­‐1989) • Aruba to perform Housekeeping obliga4ons together with Valero; compensa4on to be discussed with Valero (1989-­‐2016) • CITGO liable for environmental condi4ons aNer Effec4ve Date (2016 onwards)

CAPEX and OPEX

• CITGO to be responsible for CAPEX ($650-­‐$750 MM), NG ($200MM) and OPEX (approx. $400MM)

Ownership

• Aruba to own the Installa4ons including the capital improvements.

• CITGO to own some movables acquired during the Term of the Agreements.

Marine Opera:ons

• CITGO to exclusively manage the Marine Opera4ons.

• APA to manage the Pilotage Services.

•

Taxes and Labor Concept

Term

Special Tax Regime

• Profit Tax Rate 10% on Profits up to $100MM; 6% for Profits greater than $100MM • Minimum Annual Profit Tax $10MM; • BBO/BAZV exemp4on (same as Valero) • Import & Export Du4es excep4on on all hydrocarbons, machinery, and equipment for Refinery (same as Valero) • Excise tax excep4on on fuel to be used for running the Refinery (same as Valero)

Labor Regime

• Aruban employees will have preference, if qualified • CITGO will have a max 20% Expat Headcount for employees • CITGO has discre4onary right to employ expats for Specified Key Posi4ons, notwithstanding local market

Modern Environment, Health & Safety Standards Descrip:on

CITGO

Valero/Coastal

Environmental Performance

Contractual Obliga4ons

At Discre4on

Monitoring & Repor:ng

Obliga4ons agreed upon

No Obliga4ons

Soil, Ground Water & Marine Baseline Study prior Start Inves:ga:on Up, during and the end of term

No study done

Soil, Ground Water & Marine NG as Primary Fuel No restric4on in fuel type Contamina:on World Bank EHS Standards General requirement Flaring

Repor4ng & No4fica4on Requirements

Storage Tanks Requirements To comply with strict Interna4onal standard API-­‐653 & Inspec4on Interval

No Obliga4ons

At discre4on

Natural Gas and Clean Technologies Concept Micro-­‐Algae Bio-­‐Refinery

Natural Gas

Terms • CITGO will contribute 5.0 MM$ in the bio-­‐refinery • Aruba to explore EU funds or private par4cipa4on • Refinery will operate on NG as primary energy source • CITGO will develop and implement CAPEX and infra to have a NG Supply during Rehabilita4on • CAPEX to be funded by CITGO, REPSOL, ENI

Releases and Guarantees Concept

Valero Release

Term • Valero will be released of dismantling obliga4ons (1989, 2010 Agreements) • Transfer all assets including Terminal ($200 MM) and VMSA (Afl 40 MM) • Transfer of Environmental Trust Fund ($12 MM): capped environmental liability (1989) • Senlement Sum (TBD)

Dismantling

• CITGO and Aruba will share the Dismantling costs equally at the End of the Term • CITGO will cover all the Dismantling costs in the event of Early Termina4on

CITGO Guarantees

• PDVH Parent Guarantee for US$ 150MM; • Intercompany Service Agreements with CITGO Petroleum Corpora4on Inc. • No change of control

Comparison Lease Agreement Curacao and Aruba Lessor Government Revenues

Capital Projects

Clean Technologies & Green Ini:a:ves Parent Company Guarantee

Aruba

Curacao

CITGO

PDVSA

Fiscal Regime; Annual Profit Tax

Tax Holiday

• CITGO will fund all CAPEX, • PDVSA will only fund 100% of Environmental CAPEX and NG Margin Improvement Projects CAPEX • RdK will fund 100% of • RdA not responsible for any Environmental CAPEX funding • Refinery will operate on NG as a primary energy source Not envisioned • CITGO will co-­‐fund for $5MM the carbon capture project PDVH Guarantee

• Based on EHS Guidelines For Petroleum Refining, IFC/WB Environmental Standards • To be regularly evaluated & updated Dismantling

RdA & CITGO to split cost at 50% each at end of Term.

No Guarantee Standard formulated in 1994.

No update has taken place since then.

RdK fully responsible for dismantling cost at end of term

Conclusions

Contribu:on to GDP

• 12.4%-­‐15% (AIB)

Labor

• Up to 3000 direct/indirect employment

Economic Growth

• 6.7% in 2016 and 5.7% in 2017 (CBA)

Balance of Payments

• Influx of Foreign Reserves

Public Finance

• Minimum Afl 90 MM contribu4on (LB, WB, premiums) of Refinery and contractors • Minimum Profit Tax of $10MM