VENEZEULA - The US Operations.

USA is PdV M&M's main market, usually accounting for 60% of the country's oil exports. Until President Chavez was elected in December 1998, as he had warned he may sell all or part of the overseas holdings, PdV M&M used to aggressively widen and consolidate its presence in the US market through PdV America and its operating arm Citgo. The Chavez government appointed new leaderships for PDVSA which ceased to expand in the US. But despite the anti-US rhetorics by Chavez, his Foreign Minister and former president of PDVSA Ali Rodriguez, when asked last March whether the NOC was to reduce exports to the American market, said: "No. PdV's plans call for increasing [crude oil] production capacity to 5m b/d in the next five years, so Venezuela will have the capacity to increase exports to the US and a percentage of the new demand in China, India, Thailand, Asia and, of course, South American and Caribbean countries. The aim is not to decrease exports to the US but to increase the production capacity of our country".

Asked by Petroleum Argus of March 14 whether PDVSA planned to sell Citgo assets in the US, Rodriguez said: "No, we are realigning our refining system according to our strategy, which is to add value to our [crude] oil. Some refineries - not just Citgo ones but also ones in Venezuela - are not aligned with this strategy. Our crudes are based on heavy and extra-heavy oil and many refineries are only processing light oils, so we have to enhance the performance of this refining system to process heavy oil". He said PDVSA "will probably sell some refineries such as Lemont. This is a very good refinery, but it does not process crude from Venezuela. We will probably sell this refinery and buy another refinery to process Venezuelan oil". (On the European refineries see Gas Market Trends).

PdV M&M has a strong position in the US market, with five fully-owned refineries and four joint ventures. Two of the JVs are linked to upstream partnerships in Venezuela with Conoco and Phillips (now part of ConocoPhillips) and Mobil (now part of ExxonMobil).

Citgo Petroleum Corp, based in Tulsa, Oklahoma, is a 100% owned operating arm of PdV America and is an integrated refiner, transporter and marketer of fuels, lubricants, petrochemicals, refined waxes, asphalt and other industrial products. Citgo has a fully owned oil refining capacity of 752,000 b/d, over 13,500 retail outlets covering the whole of the US, and stakes in 518,000 b/d of refining ventures. It is the third biggest downstream entity in the US next to ExxonMobil and Motiva, the 50-50 Shell-Saudi Saudi Aramco JV (see omt16SaudiOversOct17-05).

Citgo purchases a part of Venezuela's crude oil exports. It has been supplied with Venezuelan crudes by a separate PDVSA subsidiary, Commercit, which from early 1998 became part of PdV M&M.

Of Citgo's fully-owned refineries - at Lake Charles (Louisiana), Corpus Christi (Texas), Paulsboro (New Jersey), Savannah (Georgia), and Lemont (Illinois) - the Lemont plant was the latest to become fully-owned by Citgo, under a $250m deal with Unocal in late 1996 to take over Unoven, a 50-50 partnership formed in February 1989.

Citgo's other refineries have deep-conversion units. It has two asphalt refining units at the Paulsboro (New Jersey) and Savannah (Georgia) refineries and one lubricants plant at its Lake Charges refinery called Cit-Con.

With its famous logo spread from coast to coast and in the other parts of the US through its 13,500-plus locations in 48 states, Citgo markets several different octane grades of gasoline, complete with its proprietary "high performance" detergent additive, "to satisfy the needs of a wide range of vehicles and operating conditions". These include the 110 octane racing fuel.

Citgo markets over 600 different types of lubricants and waxes. It is the largest asphalt refiner and marketer on the East Coast and one of the largest suppliers of petrochemicals in the US. Citgo markets high quality diesel, heating oils and aviation fuel. Citgo's marketing outlets, many of them also including convenience stores and diners, cover the mid-Atlantic, the north-east, mid-west, south east and south-west. It has 54 bulk-storage terminals. Originally part of Cities Service Co. that dates back to the turn of the century and later part of the famous convenience store chain 7-Eleven, Citgo was acquired by PDVSA in 1990, with PDVSA having bought 50% into the company in 1986 (see background in Vol. 61, OMT No. 21).

The Lake Charles refinery in Louisiana, designed with a capacity of 320,000 b/d, can actually run more than 330,000 b/d of crude oil. Citgo is to raise its capacity by another 100,000 b/d. (A fire damaged the refinery's Unicracker on Sept. 21, 2001. Repairs were completed in mid-November 2001. This accident, and a shut-down at the Lemont refinery near Chigago, caused products prices to rise).

The Lemont refinery, near Chicago, was offered for sale in 1999 and Citgo negotiated a deal with Suncor, an integrated Canadian firm. But the deal did not materialise. Thereafter the sale offer was withdrawn, because oil prices rose considerably and refining assets in the US became expensive in 2000. In mid-August 2001 a fire severely damaged the refinery's crude oil unit and, as a result, the plant's vacuum distillation unit collapsed. This alarmed mogas traders as it occurred when gasoline stocks in the US mid-continent were already tight and consumers were reeling from high pump prices.

News of the accident caused Canadian sour crude prices to fall by more than $4/b. (Canadian sour crudes account for about 90,000 b/d of the refinery's throughput). Pending repairs, Citgo got a derogation from the area's stringent gasoline standards and in September 2001 restarted some of the plant's other process units. Repair of the crude and vacuum distillation units was completed in early 2002.

The refinery usually produces over 80% high value clean products. It has an upgrading facility suited for Canadian crude oils. Unoven, part of the Lemont system acquired from Unocal, has marketing operations in seven mid-western states, including 149 retail outlets, as well as supply deals with some 2,500 independent service stations. It has 14 terminals and truck rack facilities and participation in nine pipelines carrying crude and petroleum products.

Lemont remains among refineries in the US that are for sale as Citgo still believes it is worth its wile getting rid of it if the price is right. US independent refiner Premcor was in 2003 mentioned among possible buyers of the refinery.