VENEZUELA - Cit-Con Oil.

Citgo has been negotiating with ConocoPhillips to buy the latter's 35% stake in the Cit-Con Oil lubes refinery in Lake Charles. It was said in late 2003 the purchase would advance Citgo's objective to become the leading international supplier of lubricants and wax.

The plant's capacity is 12,000 b/d. Before the November 2001 announcement of its merger with Phillips, Conoco said the plant was no longer a core asset for the company.

The Lyondell/CITGO refinery in Houston is a partnership which has evolved since the early 1990s. In 1994, Citgo raised its stake in this from 5% to 11%. In the same year, Citgo provided finance for upgrading at the refinery so it would be able to process up to 200,000 b/d of heavy Venezuelan crude oil of 17 deg. API. The Citgo stake was raised later to 42%. In 1998 the stake was reduced to 41.25% after a rise in the JV's capacity and capital and Citgo's share was worth $597m, from $630m in 1997 when the stake was 42%. Negotiations to buy Lyondell out of the Houston refinery ended inconclusively in August 2000.

In February 2002 Lyondell sued PDVSA for $90m for breaking its contract to supply 230,000 b/d of heavy crude oil. (PDVSA invoked force majeure several times over the previous two years, claiming that OPEC measures made it impossible for the state company to deliver its crude obligations).

In 2004 PDVSA decided to sell its stake in the Lyondell refinery. Venezuelan Minister of Energy and Petroleum Rafael Ramirez, who is also president of PDVSA was on Oct. 3, 2005, quoted as reiterating that the sake was for sale and complaining about the state company's crude oil sales at a discount to Citgo. He said: "More than $5 bn has been invested that we have no way to recuperate unless we sell [Citgo's stake in] that refinery". He said PDVSA was re-assessing its strategic relationship with Citgo, adding: "We will discuss a new [crude oil] supply contract with Citgo in 2006 to give Venezuela favourable prices".

President Chavez has never been happy with PDVSA's intestments in the US. In early 2005 he said: Venezuela's assets in the US were "subsidizing George [W.] Bush" and that "the strategy [for PDVSA] is to sell in the north and become more Latin American". He then got Luis Marin removed from the post as Citgo president since mid-2003 and replaced by Felix Rodriguez who previously was PDVSA vice president for E&P.