HomePaís PetróleoWe must prevent the theft of Citgo and sell Citgo

We must prevent the theft of Citgo and sell Citgo

After the ethical, legitimate and legal rescue of PDVSA's subsidiary refiner, Citgo, from its current attempted theft politically promoted by the US Government, the Bolivarian Republic of Venezuela must immediately put that company up for sale.

Let's see why. In addition to the hostile and Venezuelan-phobic policy of the Government of that country, which embitters the idea of ​​us receiving any income from American pockets, the criteria used by the credit risk rating agencies indicate that the US is a risk country. The Moodys agency considers, in its long-term ranking, that the northern nation has been declining in its investment grade, which was AAA since 1949, but that since 2003 it has been in a decline that places it, as of 2023, in Aaa, with “Negative perspective.”

A similar decision was made by the Standards and Poor's agency in 2011, which downgraded that nation from investment grade AAA to AA+, which was followed by the decision of another renowned risk rating agency, Fitch, which in 2023 made the same resolution with the last name. of “Negative observation”, alerting investors about the risk of investing in the mecca country of respect for private property and free trade.

Immediately, the decisions raised eyebrows in the Treasury Secretariat of that country, the same agency of the US Government used to prepare and apply the 103 illegal coercive measures against PDVSA, within a total of 935 punitive actions against the people of Venezuela. He said the decision made by Fitch is “arbitrary.”

From Wall Street's point of view, these are reasons in financial language why Citgo should be sold. But in the world of hydrocarbons, other reasons have been floating around since 2005, related to the concrete, to the fundamentals of the country's refining business, which with barely 5% of the world's population consumes 25% of the fossil fuel generated by the planet.

A presentation made in June 2021 by Carlos Jordá, who was president of the PDVSA subsidiary between 1999 and 2002, titled Profile of Citgo Petroleum Corporation, Challenges of the Refining Business, provides some variables that support the decision to sell this company so soon. be recovered from the Guaidó clan and the Corporate Coup that the oil and mining companies of the US and Canada are planning to carry out. Jordá even helps reveal the reasons why a frustrated attempt was made to sell the company in 2015.

A point to highlight from the presentation is that Citgo is owned by Citgo Holding, former PDVSA América, created by PDVSA, both to manage the oil companies and associations of the industry in that country, and to “maintain the corporate veil”, that is, , to prevent charges and lawsuits directed against its owner, the Bolivarian Republic of Venezuela, from falling on it, applying the so-called alter ego, the same one that today is used and manipulated surreptitiously by Guaidó and his people, and openly and shamelessly by the Delaware Court to steal the subsidiary from the Venezuelan people.

Citgo has its origins in 1910 when Cities Services Company was founded by Henry Doerthy, to supply gas and electrical service, creating seven refineries and building at that time the longest gas pipeline in the US, 1.000 miles long. In 1935, by law, it was forced to disconnect from electrical service, it kept the hydrocarbons and during World War II it built an oil pipeline that transported oil from Texas to the refineries in the Eastern Gulf, to prevent German attacks on tankers.

The company created the Citgo brand in 1965 to compete in the US domestic market and in 1982 it was acquired by Occidental Petroleum for 4.300 billion dollars, but, due to its lack of interest in the downstream business, it was sold in 1983 to the Southland company. Corporation, owners of the 7-Eleven Chain and 7.300 service stations in the US and Canada.

However, in 1984 Citgo made losses and in 1986 PDVSA decided to buy it from Southland for 290 million dollars. It only had the Lake Charles refinery. The following year it also purchased 50% of the Champlin refinery, a subsidiary of Union Pacific Oil Company, with a 25-year contract to supply oil to the Corpus Christi refinery in Texas.

Such a purchasing plan is the so-called Internationalization of PDVSA, which was even criticized by former presidents Jaime Lusinchi (1984-1989) and Carlos Andrés Pérez (1974-1979 and 1989-1993), both from Acción Democrástica, due to the risks it involved. put so many eggs in that same basket, because of the tax burden that remained in the US, the purchase of refineries of dubious quality and because investments should come from the north to Venezuela, and not the other way around.

About this Juan Carlos Boué, in the analysis of PDVSA's Internationalization Program, strategic triumph or fiscal disaster? points out that the internationalization program began towards the end of 1982, with the establishment of a joint venture in Germany – Ruhr Öel – in partnership with Veba Öel, a company in which the German Government still maintained a significant shareholding.

“This acquisition was carried out under the auspices of a Copeyan government, at the end of the Herrera Campíns administration. AD's victory in the 1983 elections, coupled with the very high cost of the operation and the revelation that the implicit prices for Ruhr supplies were much lower than the official Venezuelan prices, led the Lusinchi government to order the suspension of the program. ”recalls Boué. “This suspension put an end to some negotiations that already had a high degree of progress, but it did not interrupt the program completely.”

And he adds: “It is worth highlighting the precarious financial situation of the majority of PDVSA's foreign partners at the time their respective association agreements were negotiated, especially because one of the basic guidelines of the internationalization program was to search for 'companies líder“It is in terms of the quality of its assets and the professionalism and efficiency in its management.”

Regarding this, Boué points out that “there may be a very good explanation behind this apparent transgression: given that PDVSA had to come to the rescue of almost all of these refineries, it could well have extracted all kinds of concessions from its partners, in view of the limited possibilities of resistance that they had in moments of extreme vulnerability. For example, when the agreement was signed that gave PDVSA a 50% stake in the Lake Charles refinery, Citgo had been hemorrhaging money for two years at a rate of 10-15 million dollars per month (National Petroleum News, October 1995, 83). However, PDVSA's association agreement with Southland does not reflect this desperate situation,” he says.

Internationalization continued. Always seeking to place Venezuelan heavy crude oil, in 1989 PDVSA and Unocal associated to form Unoven and in 1990 it acquired the second half of Champlin. In 1991 he purchased Seaview Asphalp Company. In 1992 Lyondell Citgo Refining and in 1993 the assets of Amoco to form Citgo Asphalt Refining Company.
In 1997 the second half of Unoven.

However, Boué appreciates that 75% of the Venezuelan reserves are made up of crude oil, whose gravity is less than 22° API. He believes that these crude oils do not yield many light products when distilled and their processing poses sui generis problems, especially because both their light and heavy cuts contain large quantities of undesirable elements: sulfur, vanadium, nickel. “Given that the refining margins generated by these crude oils in simple configurations are negative most of the time, the universe of buyers of heavy crude oils has been increasingly restricted to the segment of refiners with high conversion plants and, during the summer, to the refiners that produce asphalt.”

Even so, the US was experiencing a decline in its oil production until 2005, during which it had increased imports of heavy oil. But the extraction of shale crude oil, of medium light gravity, emerges, boosting total production.

The tendency is then to process light medium crude oils to the detriment of heavy crude oil. So much so, that since 2005 the tendency to reduce the number of small refineries with a low refining margin has been accentuated. The small ones close and the total is reduced from 325 to 132, but the tendency to create and convert refineries to process a greater proportion of medium and light crude oil is growing. According to 2019 data presented by Jordá, the 132 refineries refine 19,8 million barrels per day and of these 56 are on the coast of the Gulf of Mexico, to the east, and process 10,5 million barrels per day.

Due to their number, it is in the Gulf where there is greater competition and narrower refining margins. It is there where two of Citgo's three refineries operate heavy crude oil: Lake Charles and Corpus Christi. There are no refineries in Florida or along the Atlantic Ocean.

Jordá points out that the greater production of light and medium shale crude oil is being developed to the detriment of imported heavy crude oil. He shows a curve that reveals that between 2000 and 2020, while total production grows, heavy production remains the same.

In summary, to the 103 illegal and extraterritorial coercive measures against PDVSA, the political hatred of the Northern Government against Bolivarian ideas, the desire for profit with Venezuela's assets abroad, the demanding environmental measures, it is added that, Even though a good number of refineries will not stop refining heavy crude oil, it is best to sell Citgo due to the increasingly lower use of heavy oil by the US refining fleet.

Chevron has more security and confidence in operations and investment in Venezuela than PDVSA's subsidiary, Citgo, in the US.

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