Venezuela Sells Citgo’s Stake in Lyondell Refinery
Caracas, Venezuela, August 16, 2006—Venezuela announced yesterday that it is selling Citgo’s shares in the Texas-based Lyondell-CITGO refinery. Venezuela, which owns 41.25% of the plant, is selling out to its partner Lyondell Chemical Co., for a total of just over $1.3 Billion.
The announcement was made by the Minister of Energy and Petroleum, Rafael Ramirez, in a press conference held in the offices of the Ministry in Caracas.
“Last Friday, the executive council of PDVSA approved the sale of our participation in the Lyondell- CITGO refinery,” said Ramirez.
Ramirez announced that the sale is no surprise, and that they had been studying and negotiating the agreements for the past two years.
Although Venezuela is selling out to its associate, Ramirez pointed out that the sale price of $1,314 million was agreed upon through the market and without discounts or subsidies.
28 potential buyers competed for purchase of the plant, of which Chevron, Conoco-Phillips, Marathon, and Tesoro were some of the top bidders, and among only six accepted to a second phase of negotiation. In the end, Marathon Oil Company’s offer of $20,000 per barrel of crude capacity won out and was accepted.
However, on July 16, Lyondell, with preferential treatment as a partner in the refinery, asked to purchase Venezuela’s shares. They were told they would have to pay the same price offered by Marathon, to which Lyondell agreed.
Ramirez explained that the money, or “cash”, from the sale is “effective immediately” and will be delivered to FONDEN (National Development Fund). It has not yet been decided what the money will be used for.
Although Venezuela is selling its shares in the plant, it still plans to refine its petroleum at the refinery, under a new 5 year contract. Under the new terms, all previous contracts will be annulled.
According to Ramirez, Venezuela has been looking to sell their shares in the plant for many years, but under previous economies, with the price of petroleum much weaker than it is today, Lyondell refused to let them out of their 25-year contract. As a result, Venezuela has lost millions since it became a partner in the refinery in 1993.
Ramirez explained that this sale is the realization of an important “program” of the government. “Here we are fulfilling a program of the government,” said Ramirez, adding, “And we aren’t going to rest until we have adjusted the activity of the oil sector under our Constitution, and… the laws of the state. In a way PDVSA now- the new PDVSA- is acting like it should, as an instrument of the state of Venezuela to operate and produce the exploitation of our resources, but also to defend our interests in our country and abroad.”
PDVSA’s subsidiary, CITGO, and Lyondell announced plans in April to sell the refinery. The Lyondell refinery is based in Houston, Texas and has a capacity to refine 268,000 barrels of crude per day.
Oil Agreements
Ramirez also took the occasion to briefly review various energy accords and agreements signed between Venezuela and numerous countries over the last month, beginning with President Chavez’ trip to Argentina for the MERCOSUR summit and then to Belorussia, Russia, Qatar, Iran, Vietnam, Mali, and Benin. Ramirez also highlighted various energy agreements with other countries throughout Latin American, the Caribbean and the world including China, Colombia and Jamaica.
Ramirez announced that Venezuela will be increasing its oil sales to China by 50,000 barrels per day (bpd) by the end of the year, which will bring the total Venezuelan supply to the Asian country to 200,000 bpd in Venezuelan crude and other petroleum products.
Ramirez also highlighted that during President Chavez’s next visit to China, scheduled for late August, he will be signing into effect the start of operations of China’s state oil company, the China National Petroleum Corporation (CNPC), in the Zumano region of Venezuela’s Anzoategui state; and announced that they will be signing “very important agreements” in order to “acquire and construct” up to 18 crude oil tankers and dozens of oil drills.
“We are going to bring 12 oil drills from China and assemble 12 more in the country, in order to set up a joint venture of petroleum services between China and Venezuela,” said Ramirez
Speaking on Colombia, and in an attempt to combat the illegal contraband of petroleum in to the neighboring country, Ramirez declared that Venezuela will be duplicating a successful supply program to all Colombian border regions. Although more than 80 trucks used to transport the petroleum under this program were set ablaze by the Colombian guerrilla (FARC), Ramirez declared that the program and the supply will continue, and be expanded.
For several months, the Ministry of Energy and Petroleum has been supporting a program whereby cooperatives of indigenous Wayuu sell gas directly to Colombia for approximately 30 cents per liter- six times the local Venezuelan price. A percentage of each liter sold goes to the cooperative’s social development fund. According to Ramirez, under this model, they have been able to “control contraband volumes” in the Colombian municipality of Maicao. The program now supplies 11 million liters of petroleum a month. Ramirez estimated that 27,000 bpd are lost in contraband to Colombia.
Ramirez also further described this weekend’s agreement, signed during President Hugo Chavez’ visit to Jamaica, to form the joint venture Petrocaribe Jamaica Limited, between PDV Caribe (subsidiary of PDVSA) and the Jamaica company, Petroleum Corporation of America. PDV Caribe will have a 49% stake in the company and will increase production capacity of the Montego Bay Terminal and Kingston refinery from 36,000 to 50,000 bpd.
Ramirez also admitted that although Jamaica is currently not receiving its quota of 21,000 barrels of Venezuelan crude per day, PDV Caribe will push to make that mark and then increase supply to 23,500 bpd.
While in Jamaica, President Chavez additionally announced that Venezuela will be the host of the 3rd Petrocaribe Summit, which is currently planned for early September.
See also: A National, Popular, and Revolutionary Oil Policy for Venezuela