Posted on 08/17/2006 6:01:12 AM PDT by thackney
Lyondell Chemical and Venezuelan government-controlled Citgo appear to be closer to ending their joint ownership of a Houston refinery.
Venezuelan Oil Minister Rafael Ramirez said Tuesday that Petroleos de Venezuela, the state-run oil company that controls Citgo, would sell its 41.25 percent stake in the refinery for $2.2 billion, or $1.3 billion after debt, interest and taxes.
A Lyondell spokesman said Tuesday that no agreement had been reached, but the Houston-based company had said previously it planned to buy out Citgo's stake in the 268,000-barrel-a-day oil refinery.
"The proceeds from the sale will go to the company's shareholder, the Venezuelan government," Ramirez told Bloomberg News in Caracas on Tuesday, adding that the funds will be earmarked for infrastructure projects. "The sale was approved on Friday."
Houston-based Marathon Oil Corp. offered more than $5 billion for the refinery earlier this year, helping set the sale price for Citgo's stake, according to a statement from Petroleos de Venezuela, also known as PDVSA. A spokesman for Marathon declined comment.
The price PDVSA claims Lyondell is paying for its stake is the equivalent of about $20,000 per barrel of oil processing capacity, a record for a U.S. refinery, Natexis Bleichroeder analyst Roger Read told Bloomberg.
That's double the rate top U.S. refiner Valero Energy paid with its $7.9 billion purchase of Premcor, which closed in September.
The southeast Houston refinery started operations in 1918 under the Sinclair Refining Co. name but has changed owners over the years. The Citgo-Lyondell partnership was formed in 1993.
The refinery was upgraded in 1997 to better handle heavy crude, a move that made it one of the top refineries in the country because of its ability to handle the harder-to-process oils, said George Morris, an energy expert at investment bank Petrie Parkman & Co. in Houston. Morris noted that the value of the refinery based on what it reported in free cash flow last year would put it at about $3 billion, but it's widely believed the long-term supply contract it had with PDVSA for oil in recent times made its operating costs higher.
In filings with the Securities and Exchange Commission, Lyondell reported that from 2000 to 2004 the supply agreement was actually advantageous to the refinery because the price was below market prices. Since the fourth quarter of 2004 and throughout 2005, however, the agreement put its oil costs above market prices.
In a news release Tuesday, PDVSA said it provided oil at a price about $2.09 below market prices between 1994 and 2004, leading to losses of up to $705 million.
Citgo has said it planned to divest itself of assets in North America. This includes its stakes in the Colonial and Explorer pipelines, and two asphalt plants. Citgo said recently it will stop selling gasoline in 10 states and parts of four others.
Lyondell confirms deal for Citgo stake in refinery
http://www.chron.com/disp/story.mpl/business/energy/4122589.html
Aug. 17, 2006, 1:12AM
Lyondell Chemical has confirmed it is buying Citgo's 41.25 percent interest in the Lyondell-Citgo refinery in Houston for about $2.1 billion, including debt.
The refinery will continue to buy up to 230,000 barrels of oil a day from Petróleos de Venezuela, the state-owned oil company that controls Citgo, but under a new contract based on market prices.
Since late 2004, the refinery had been paying above-market prices for oil from PDVSA based on terms of a contract first negotiated in 1993.
Venezuelan Oil Minister Rafael Ramirez announced the deal on Tuesday, but at the time Lyondell officials said a final agreement had not been reached.
"This acquisition, coupled with a new market-based crude oil contract, unlocks the true value of this unique asset and contributes significantly to shareholder value," Lyondell President and CEO Dan Smith said.
The refinery will become a wholly owned subsidiary of Lyondell.
Lyondell noted full ownership of the refinery would have increased the company's net income for the first six months of 2006 from $450 million to $640 million, or from $1.74 to $2.47 a share.
tom.fowler@chron.com
Hmm...
Since late 2004, the refinery had been paying above-market prices for oil from PDVSA based on terms of a contract first negotiated in 1993.
Forget that. Nationalize it and give Hugo zip.
He'll only use any money from a sale to buy more weapons to attack us or kill his own people with.
It sounds like Chavez needs money and Lyondell is getting a pretty good deal.
We have a constitution in this country that prohibits confiscation of private property.
goofy US gasoline laws are ripping off US motorists.
this story is evidence.
US motorists pay now
Congress pays in November
someone needs to walk by...trip on the sidewalk..and sue for billions.....that's how we do it in America
You mean this?
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
Based on the Kelo decision they can sieze it and determine that the "just compensation" is $1.
He'll sue, but it can be tied up in court for years. In the meantime declare a state of emergency exists within the boundaries of that site and turn it over to the military to run.
It's not a serious suggestion, by the way, just venting. I know it would be a bad thing and I also know that our courts would rule in favor of the blood sucking marxist dictator and against our President in a heart beat.
About time......
Their PR ability is dead and they are no longer welcome in this country.
No, he is bugging out of the U.S. as quickly as he can.
You can bet that he will be converting to euro's and making sure that none of his assets can be touched by U.S. regulators.
He will then ratchet up his little war against everything American and really come to the fore as our biggest pain in the butt.
Public domain, supreme court...if it for the higher good.
If you believe that is an absolute rule, then start a campaign to return to the Nazis the assets seized from them by the US govenrment in 1941-1942.
We are not at war with Venezuela.
That isn't entirely clear at this point.
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