Former president advises against selling Citgo

Luis Marín, the former president of Citgo, the US refining and distribution subsidiary of Venezuelan state oil firm PDVSA, has refuted the government's arguments for selling the company in a report submitted to the national assembly, newspaper El Universal reported. The report, prepared in February this year when Marín was still president, was submitted to the national assembly's subcommittee investigating alleged corruption at Citgo. PDVSA president and energy and oil minister Rafael Ramírez recently announced it would sell two of Citgo's asphalt refineries - Paulsboro and Savannah - and more divestments could follow. President Hugo Chávez said in February that Citgo is a money loser and that Venezuela would do well to get rid of it. However, the opposition says that selling Citgo would make little business sense and would only be a political maneuver in Chávez's ongoing war of words with the George W. Bush administration. Chávez and Ramírez say that a discount on the sale of Venezuelan crude for processing in refineries jointly owned with third partners and the purchase of Mexican and Canadian crude instead of PDVSA's is hurting Citgo's profits. However, the report said that PDVSA made US$1.56bn profits from Citgo from 1986-2004 even after paying taxes in the US and taking into account a US$0.57/barrel discount on crude exports to Citgo. Only one refinery in Texas, where PDVSA holds 41.25% and Lyondell the rest, receives a discount of US$4/b over the spot price. As a result, PDVSA's lost earnings amount to US$1.72bn, which is partly compensated by profits of US$910mn from the agreement. Purchases of Venezuelan crude have increased so dramatically since 1986, when Citgo was established, that almost all of the oil shipped to the US is processed in Citgo refineries. PDVSA's exports to Citgo are currently 1.12 million barrels a day (Mb/d) out of total exports of 1.5Mb/d. Only one Citgo refinery, Lemont near Chicago, does not process Venezuelan crude because it is more convenient to process Canadian or Mexican crude given the refinery's location, the report said. Citgo refines oil and makes asphalt in eight facilities in the US and the Virgin Islands. Citgo fuels are then distributed through 14,000 gas stations operating under the Citgo banner. Félix Rodríguez replaced Luis Marín as CEO of Citgo in February. Marín was appointed to the post in August 2003 and no new position has been announced for him.