February 4, 2005
Feb. 2 (Bloomberg) -- Venezuelan President Hugo Chavez said his government may sell eight U.S. refineries as part of a strategy by the world's fifth-largest supplier of oil to reduce dependency on sales to the U.S.
``Not one Venezuelan works at these refineries,'' Chavez said in Buenos Aires yesterday, according to Venezuela's Communication and Information Ministry. ``They don't give us one cent of profit. They don't pay taxes in Venezuela. This is economic imperialism.''
Chavez, who on Jan. 30 signed agreements with China to boost sales of gas and oil to the world's second-largest energy consumer after the U.S., also said he may sell refineries in Germany, Sweden and the U.K., according to the ministry's Web site.
Venezuela's threat to exit businesses in the U.S. reflects stepped up rhetoric by Chavez, 50, a friend of Cuban President Fidel Castro, to reduce business with the U.S., buyer of about half of all Venezuelan oil exports.
In the past several weeks, state oil company Petroleos de Venezuela SA vowed to review 33 contracts with ChevronTexaco Corp., ConocoPhillips and other oil field operators in the country and rejected a business plan by Houston-based Harvest Natural Resources to drill.
`SERIOUS CONCERNS'
``We have serious concerns,'' White House spokesman Scott McClellan said yesterday at a press briefing when asked about Chavez's plan to reduce oil business with the U.S. ``We have made our concerns known when it comes to President Chavez. We have talked about our concerns with other leaders in the Americas.''
Citgo Petroleum Corp., the U.S. fuel-making unit of Petroleos de Venezuela, owns four U.S. oil refineries and two asphalt plants, with a combined daily crude processing capacity of 756,000 barrels. The company also operates a 265,000 barrel-a- day refinery in Houston that's a joint venture with Lyondell Chemical Co. and has more than 13,500 U.S. retail fuel outlets.
The Hovensa refinery in St. Croix, U.S. Virgin Islands, is a joint venture of New York-based Amerada Hess Corp. and the Venezuelan state oil company. The plant can process 495,000 barrels of oil a day, making it one of the largest in the world.
Chavez said Jan. 28 that the U.S. is ``robbing'' the country of tax revenue because of unfair contracts between Petroleos de Venezuela and Citgo.
Chavez said Citgo's contracts gave the U.S. a discount on oil prices. Energy and Oil Minister Rafael Ramirez made similar comments in May 2004. Citgo's contracts include discounts of as much as $4 a barrel, Ramirez said.
Citgo, a 100-year-old company based in Tulsa, Oklahoma, on Dec. 8 announced it would pay a $400 million dividend to its parent company, according to a statement on the Petroleos de Venezuela Web site.
SOUR CRUDE
Citgo's U.S. refineries may be attractive to refinery owners in the U.S. because they are equipped to process Venezuela's heavy, high-sulfur crude, also known as sour oil. Most refineries are equipped to process light, sweet oil, and the U.S. price benchmark is a sweet crude oil.
When oil rallied to an all-time high of $55.67 a barrel in October last year in New York, the price of sour crude oil lagged. Sour crudes are available from many sources, including Saudi Arabia. Much of the additional oil Saudi Arabia pumped when it increased output last year to help ease prices was sour, analysts said. Supply of the lower-quality oil outstripped demand.
Valero Energy Corp., the third-biggest U.S. refiner, yesterday said fourth-quarter profit more than tripled as the company benefited from its ability to process less-expensive sour crude oil. Valero Chief Executive William Greehey has said the company plans to add more capability to process sour crude.
VALERO, PREMCOR
Valero and Premcor Inc. are the most likely suitors for Citgo's refineries because they specialize in refining high- sulfur crude, said John Meloy, a Houston-based analyst at Natexis Bleichroeder.
``Valero is interested and they'll probably have to fight Premcor,'' said Meloy, who doesn't own or rate Valero or Premcor shares. ``Clearly, the Citgo refineries are desirable.''
Valero spokesman Mary Rose Brown didn't immediately return a phone message left at her office. A phone message left for Karyn Ovelmen, spokeswoman for Old Greenwich, Connecticut-based Premcor, wasn't immediately returned.
San Antonio-based Valero paid about $3,100 per barrel in May 2003 for Orion Refining Corp.'s plant in St. Charles, Louisiana, which processes similar grades of crude as Citgo's refineries, Meloy said.
``I don't think they're going to get them that cheap this time,'' Meloy said. ``The market has moved up significantly since then.''
SOUR MARS BLEND
Sour Mars Blend, a high-sulfur crude from beneath the seafloor of the Gulf of Mexico, averaged about $3.50 a barrel cheaper than Light Louisiana Sweet between 1998 and the end of last year. The difference averaged almost $8 over the past six months, according to Bloomberg data.
Ivan Orellana, Venezuela's representative to the Organization of Petroleum Exporting Countries, said Jan. 30 that Petroleos de Venezuela had begun reviewing its contracts to supply oil to refineries including Citgo. Contracts found to be not in the national interest would be renegotiated, he said in an interview at the OPEC meeting in Vienna.
Orellana said the reevaluation of the contracts ``isn't going to be arbitrary'' and would be done in negotiations that recognized the legal requirements of existing agreements.
Petroleos de Venezuela, which also has assets in the Caribbean, said last year that it may sell some overseas units to fund investment in more lucrative businesses. In Buenos Aires yesterday, Chavez said Venezuela may buy the assets of Royal Dutch/Shell Group in Argentina, according to the Communication and Information Ministry.
http://www.bloomberg.com/news/top.html