Peter Howard Wertheim
RIO DE JANEIRO, Feb. 7 -- Venezuela's President Hugo Chávez said Feb. 2 that his government plans to sell its interests in eight Citgo Petroleum Corp. refineries in the US along with an undetermined number of its 13,000 retail outlets, 90% of which are in the US and 10% in Puerto Rico.
Citgo, the fifth largest gasoline refiner in the US, with annual revenues of $25 billion, is owned by PDV America Inc., a subsidiary of Venezuela's state oil company Petroleos de Venezuela SA (PDVSA).
Chávez said Citgo should be sold because it was "denying PDVSA adequate revenue and because it was, in effect, contributing tax to the government of President George W. Bush, rather than to Venezuela." Chávez claimed the contracts between Citgo and PDVSA are unfavorable to Venezuela due to the discounted prices of its exported crude.
Citgo currently refines 859,000 b/d of heavy crude but has capacity of more than 1.1 million b/d, PDVSA said. It owns a 156,750 b/cd refinery at Corpus Christi, Tex., a 308,085 b/cd refinery at Lake Charles, La., and a 158,650 b/cd refinery at Lemont, Ill., along with asphalt refineries in Paulsboro, NJ, and Savannah, Ga.
Citgo also owns 41% interest in a 268,850 b/cd Houston refinery, with Lyondell Chemical Co. holding 59%, and participates in a joint venture with Amerada Hess in a 495,000 b/d refinery at St. Croix in the Virgin Islands.
Steven Paget of First Energy Capital Corp. Group put the sale value of the assets at $8-10 billion.
Venezuela produces 2.6 million b/d of heavy oil and exports 1.1 million b/d of it to the US.
Venezuela has agreed to increase oil sales to China. Chávez said proceeds from sale of the US assets would be used to expand activities with China and Argentina, where PDVSA is negotiating the purchase of a Royal/Dutch Shell subsidiary.
PDVSA, China strengthen ties
Chávez signed agreements Jan. 29 strengthening ties to energy-hungry China and offering the Asian country almost unlimited access to Venezuela's massive oil and gas reserves. The offer increases oil exports to China and gives it preferential terms and conditions to operate oil fields in Venezuela and to invest in new Venezuelan refineries.
In Beijing in late December Chávez said China would be given free rein to operate 15 mature oil fields in eastern Venezuela to produce more than 1 billion bbl of crude. Venezuela and China also will continue a joint venture agreement to produce stocks of Orimulsion, the Venezuelan substitute boiler fuel, and Chinese firms are expected to bid for gas exploration contracts in the western Gulf of Venezuela in 2005.
China Petroleum & Chemical Corp. last summer signed a significant strategic energy alliance with Brazil's state-run oil company Petróleo Brasileiro SA (Petrobras) (OGJ, July 5, 2005, p. 35).
Chávez continues to promote the creation of PetroAmerica, a strategic alliance of Latin American state oil companies led by Venezuela, Argentina, Brazil, and Bolivia (OGJ Online, Oct. 13, 2004).
Within that framework PDVSA and Petrobras for years have considered jointly installing a $2 billion refinery in Pernambuco state in northeastern Brazil, where it would have a potential market of 27 million consumers. Although the cost has long been a stumbling block, PDVSA's sources in Rio de Janeiro said that negotiations for the refinery are at "an advanced stage."
PDVSA is said to be negotiating the purchase of the private Brazilian refinery Ipiranga in Rio de Janeiro, one of only two private refineries in Brazil.