NEW YORK -- Exxon Corp. Wednesday announced it will close its Lago refinery in Aruba early next year because of weak world oil demand and Venezuela's failure to provide an 'acceptable' crude oil supply contract.
Exxon said the refinery, which has the capacity to refine 300,000 barrels a day, is expected to show an operating loss of more than $50 million this year and 'similar losses in the future.'
The Lago Oil & Transport Co. Ltd., a wholly owned affiliate of Exxon, plans to terminate all refining and transhipping operations at the facility on the Caribbean island by March 31, 1985.
More than 900 employees will be affected by the closing of the refinery, which was built over 50 years ago to process Venezuelan heavy crude oils.
Sources in Aruba said the Lago refinery accounts for roughly half the economy of the island.
'Lago's refinery shutdown is partly because of depressed world demand for rfefined products, which has led to a worldwide oversupply of refining capacity, and partly because of the failure of recent negotiations between Exxon and Lagoven,' said Juan Yanes, general manager for Exxon's Caribbean and Central American operations.
Lagoven, the Venezuelan state oil company, supplies most of the crude for the refinery.
'Lagoven didn't give us an acceptable crude contract,' said an Exxon spokesman at the company's headquarters. She did not elaborate.
In Caracas, Lagoven had no immediate comment.
Under Exxon's 1984 contract with Lagoven, Venezuelan crude supplies for the refinery were reduced to 180,000 barrels a day from as much as 290,000 barrels a day in the past. Mexico has supplied an additional 20,000 barrels a day of crude this year.
'Crude pricing was no longer tied to product prices' in the 1984 contract with Venezuela, Exxon said.
Exxon said the recent negotiations with Lagoven considered the sale or lease of the refinery but 'failed to evelopment an agreement which would allow sustained operations in Aruba.'
Exxon called the shutdown of the refinery 'a decision of last resort.'
'Every effort has been made over the past few years to keep Lago operating on a profitable basis, including the investment of about $130 million in capital improvements and $280 million in maintenance over the past seven years,' Yanes said.
Exxon cut manpower and operating costs at the refinery by almost 30 percent this year, he said, but concluded that further investment would produce continued losses.
Yanes said Exxon will give the refinery's employees a 'significant' package of severence pay benefits and continue to supply customers now served by the facility.
