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Page added on August 7, 2014
Venezuela Selling US Oil Company Citgo
Venezuela’s government has confirmed that it is considering the sale of its oil refining and distribution network in the U.S. amid a worsening economic crisis.
Analysts said the proposed sale reflects the socialist government’s urgent cash shortage.
Last week, the state-owned oil company Petroleos de Venezuela SA signaled its interest in a finding a buyer for U.S.-based Citgo Petroleum Corp. in a bond prospectus. On Tuesday, Oil Minister Rafael Ramirez said Venezuela will sell Citgo if the price is right, but added that the government is not in a hurry to make a deal.
The company, believed to be worth as much as $15 billion, has long been an unloved stepchild of the revolution. The late President Hugo Chavez called Citgo a “bad business” that contributed to the tax coffers of the United States and made no profit for Venezuelans.
He repeatedly floated the idea of selling the company, which operates refineries in Texas, Louisiana and Illinois and sells fuel through thousands of gas stations. Rival Gulf Coast refiners are seen as potential buyers.
Venezuela’s government has long used its U.S. company as a political tool. Chavez had Citgo distribute discounted heating oil to low-income American families in a high-profile program aimed at criticizing Washington’s approach to the poor. More than 1.7 million Americans have received oil from Citgo to keep warm during the cold winter months, according to the subsidiary.
Many states initially rejected the program, but it was embraced by some. Former U.S. Rep. Joseph Kennedy II spoke out in its favor, saying Chavez cared about the poor at a time when the world elite turned a blind eye.
Venezuela, an OPEC member that has among the largest oil reserves in the world, is struggling to overcome an economic crisis after years of overspending that’s fueled inflation now surpassing 60 percent. The government has restricted Venezuelans’ ability to obtain dollars as oil production has declined, forcing imports to fall and leading to record shortages in an oil-dependent economy where manufacturing is thin.
Outside analysts say President Nicolas Maduro needs to loosen currency controls to restore balance to the economy.
But the government’s willingness to sell Citgo suggests a strong aversion to taking such dramatic steps, said Risa Grais-Targow, an analyst at the Washington-based Eurasia Group.
Juan Carlos Sosa, editor of the oil trade publication Energizing Ideas, said the sale of Citgo would give the government financial breathing space, but could rob the country of a major source of income over the long term.
Much of Venezuela’s oil goes to domestic consumption and to supply agreements with China, Cuba and other Caribbean allies. The barrels sold by Citgo in the U.S. market represent the only oil sold with net income, Sosa said.
“If Citgo is sold, we’ll have to rely on a third party to sell that oil, and if that party does not want to buy our oil, it will be much more difficult to place because there are very few refineries worldwide capable of processing most Venezuelan crude, which is heavy and extra heavy,” he said.
11 Comments on "Venezuela Selling US Oil Company Citgo"
Northwest Resident on Thu, 7th Aug 2014 1:56 pm
If I owned Citgo, I’d be looking to cash out now too while there’s still a chance to get some fair value for it. What are the chances that Venezuela’s government sees the writing on the wall and wants to take immediate steps to prepare for what’s coming, same as everybody else? $15 billion (or so) right now will probably be much better for Venezuela than depending on Citgo profits in the future — assuming of course that the $15 billion is wisely spent and not just put in offshore accounts owned by Venezuelan government officials.
Davy on Thu, 7th Aug 2014 2:33 pm
NR, too bad the money will be sucked into a black hole. It will sound like a Latin American version of that song you wrote. LoL
Northwest Resident on Thu, 7th Aug 2014 2:37 pm
Davy — That bad, huh? Actually, I thought my guitar solo on that song was kick-ass, but yeah, the singing was like a buzz saw.
bobinget on Thu, 7th Aug 2014 2:45 pm
This is big news in so many ways. It will be of great interest to see who bites
Exxon may make a play for that cash once a deal is concluded.
Plantagenet on Thu, 7th Aug 2014 2:49 pm
Its sad to see how the socialist government in Venezuela has squandered their oil riches and destroyed the economy of that country. The sale of CITGO may raise some desperately needed cash for Venezuela, but it will do nothing to fix the deeper seated problems caused by the incompetent Cuban-style economic policies of the current Venezuelan government.
Plantagenet on Thu, 7th Aug 2014 2:56 pm
Here’s another reason for the sale—the CITGO refineries are all obsolete. The three CITGO refineries all are built to handle heavy high sulfur crude from Venezuela. The millions of bbls/day of oil coming from tight shales in the US is LIGHT oil—CITGO’s refineries can’t handle it.
JuanP on Thu, 7th Aug 2014 2:59 pm
I actually worked for Citgo’s HQ in Florida more than a decade ago for a little over a year. They wanted me to stay and I had fun while it lasted, but I didn’t like the corporate crowd and culture, though I spent most of my time out of town.
I’ve been expecting this sale since then. It was only a matter of time before PDVSA would sell Citgo. This would seem a good time. So, it looks like need is driving them to make a good business decision.
This money should keep Venezuela afloat for another year.
JuanP on Thu, 7th Aug 2014 3:48 pm
Just to be specific, I didn’t work at the Citgo corporate HQ in Houston, Texas, but at their Florida retail and franchise HQ, which I don’t know if still exists or was consolidated to TX.
Makati1 on Thu, 7th Aug 2014 8:30 pm
China will be glad to buy their oil. This is just one more disconnect from the sinking USS Dollar and the USSA.
As for the elite of Venezuela taking a bite out of the cash, they are no different from the elite in the US or any country these days. The US elite did not almost double their wealth in the last 10 years of recession by being honest. The US government subsidizes their wealth to the tune of billions every year. Or is it trillions? And who pays? The disappearing middle class.
So, before you point a finger, look in the mirror.
synapsid on Fri, 8th Aug 2014 1:19 pm
Plantagenet,
Those Gulf Coast refineries are also configured to handle the Mexican heavy, and the bitumen from the Canadian oil sands.
Stephen on Sat, 9th Aug 2014 7:58 am
It will be interesting to see who buys it. ExxonMobil? Royal Dutch Shell? Chevron? BP? Saudi Aramco? China? Pemex?