Lyondell, Venezuela's Citgo eye refinery sale
Thu Apr 6, 2006 4:44 PM ET
NEW YORK, April 6 (Reuters) - Lyondell Chemical Co. and Venezuelan-owned Citgo Petroleum Corp. are considering selling their joint-venture 268,000 barrel per day refinery in Houston, Texas, the companies said on Thursday.
"We have signed a letter of intent (to study a sale)," David Harpole, a spokesman for Lyondell, said.
"The companies will move diligently and expeditiously to prepare an offering memorandum and establish a data room for interested bidders," Lyondell and Citgo said in a statement.
Lyondell holds 58.75 percent and Citgo holds 41.25 percent of the joint venture partnership, which has soured in recent years over crude supply issues with PDVSA, the Venezuelan state oil company and Citgo's parent.
Lyondell filed a lawsuit against PDVSA in early 2002 for breaking a crude supply agreement after Venezuela cut shipments to the Houston refinery to comply with a lower output quota set by the Organization of Petroleum Exporting Countries.
The administration of Venezuelan President Hugo Chavez has criticized PDVSA's long-term supply deals with Citgo and U.S. refiners for selling crude at what the government has called below-market value through unfavorable long-term contracts.
Lyondell officials said the two partners had resolved the litigation but did not give settlement details. They added that any interested buyers for the refinery would have to discuss the continuation of the current crude contracts with Venezuela.
The Lyondell-Citgo refinery has complex units to maximize the volume of light products, such as gasoline, made from heavy sour Venezuelan crude, which typically sells at a discount to lighter, sweeter grades.
ON THE BLOCK
Venezuelan Energy Minister Rafael Ramirez said in September the world's No. 5 oil exporter was considering selling its stake in the refinery. But Citgo President Felix Rodriguez said in October the sale had been put on hold as PDVSA was making money from the refinery.
PDVSA has launched a review of all of its assets, including Citgo, to maximize profits. But Citgo, which is also one of the largest U.S. gasoline retailers, has no plans to put other refineries on the block right now.
"We are not selling our wholly-owned refineries or other strategic assets," Citgo President Felix Rodriguez said in a statement. Citgo also owns refineries in Lake Charles, Louisiana; Corpus Christi, Texas; Lemont, Illinois; and Paulsboro, New Jersey.
Chavez, a harsh critic of the U.S. government, is seeking to diversify Venezuela's crude away from the United States, the top buyer of its oil.
The left-wing leader is seeking to tap growing markets in China and India for new oil production that PDVSA plans to bring online in coming years.
But analysts say it will be difficult for Venezuela to find fresh markets for its heavy crude output, as the U.S. Gulf Coast has the most refineries geared to run the low-quality oil.
Strong refiner profits from recent high U.S. fuel prices have prompted a series refinery buy-outs, with Brazil's state-run oil company Petrobras buying half of 150,000 bpd Pasadena, Texas refinery from Astra and U.S. independent Valero taking over Premcor.
Neither company said it had plans to buy the Lyondell-Citgo refinery, although Petrobras expressed interest in buying or renting Lyondell's share of the venture earlier this year.
Lyondell shares were up 8.58 percent, or $1.71, at $21.63 in afternoon New York Stock Exchange trade.
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