CITGO Denies Company for Sale

TULSA, Okla. -- Petroleos de Venezuela SA's President Ali Rodriguez said the government-owned oil company right now has no plans to sell or dispose of CITGO Petroleum Corp. or any of its assets, but didn't rule out the prospect of dumping some of its petroleum assets in the future.
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"CITGO is not for sale," Rodriguez in a press release, responding to media reports in Venezuela and The Wall Street Journal about discussions between Venezuelan President Hugo Chavez and Nigerian President Olusegun Obasanjo about a possible sale of CITGO to Nigeria.

But over the weekend, Rodriguez said CITGO's operations, along with all of PDVSA's operations, were being studied by consultants McKinsey & Co. "We are evaluating everything and there is no precise answer," he said.

As the Venezuelan oil industry strike drags on into its second month, CITGO, a major U.S. refiner and the fifth-largest retailer of gasoline, is being strangled by woes at its parent company. In an effort to oust Chavez, the opposition has staged marches, demonstrations and the ongoing work stoppage, according to a Wall Street Journal report.

In late December, evidence emerged in Caracas that Chavez discussed the possibility of selling CITGO to the Nigerian state oil company last year. In a letter sent to Chavez by Obasanjo on July 12, 2001, Obasanjo wanted to follow up on a discussion he and Chavez had in Jakarta in May about Nigeria buying Venezuela's U.S. refineries and service stations. Both men said they were awaiting the results the McKinsey report, which is due out Jan. 6, before taking any action.

More than any other refiner, CITGO, which relies on Venezuela for about 50 percent of its crude under long-term contracts, is under the gun to find alternative supplies. In its press release, CITGO said it has been able to replace the loss of Venezuelan supplies at its plants in Lake Charles, La., and Corpus Christi, Texas. Both plants rely on Venezuelan heavy crude for about half of their normal crude requirements.

CITGO operates six refineries in the United States with a throughput capacity of 1.1 million gallons per day. The refiner/marketers services 13,400 gas stations and convenience stores in all 50 states.

In December, CITGO was forced to replace Venezuelan crude supplies with purchases of spot cargoes on the open market, "enabling all the refineries to run at full capacity," said Oswaldo Contreras, CITGO's president and CEO. Contreras said CITGO's refineries continue to run at "optimal, economical rates" and that CITGO is meeting its contractual commitments to its customers.

Also last month, Fitch Ratings placed the oil company's debt ratings on Rating Watch Negative as a result of the political uncertainty underlying Venezuela's strike. "Fitch believes that the supply interruptions from Venezuela will remain in place at least as long as the national strike continues unabated. The oil sector's overwhelming support for the strike has effectively shut down Venezuela's hydrocarbon industry, disrupting crude oil and derivative product export flows," the ratings firm said in a statement.