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Citgo to halt flow to U.S. independents

By Times Staff
Published July 13, 2006

While it may create some logistical headaches for gasoline retailers in the short term, the move should not have any impact on the nation's overall fuel supply.

Citgo, which is wholly owned by Venezuela's state oil company, currently has to purchase 130,000 barrels a day from third parties to meet its service contracts at 13,100 Citgo-branded stations across the United States. This is less profitable than selling gasoline directly from its refineries.

Instead, the Houston company has decided to sell to retailers only the 750,000 barrels a day that it produces at three U.S. refineries in Lake Charles, La., Corpus Christi, Texas, and Lemont, Ill., according to a statement late Tuesday.

As a result, the Citgo brand will disappear entirely from 10 states and be less common in four additional states by March 2007, when the change goes into affect, Citgo spokesman Fernando Garay said Wednesday.

Venezuelan President Hugo Chavez has long claimed that parts of Citgo's business produce losses for Venezuela and constitute a subsidy for the U.S. economy.

Oil Minister Rafael Ramirez has also charged that Citgo isn't profitable enough and that its parent, state-owned Petroleos de Venezuela SA, or PDVSA, could at some point sell off some of the company's refineries. Garay said Wednesday he knew of no plans for Citgo to sell its U.S. refineries. However, in a sign of the apparently lucrative relationship between the two companies, PDVSA announced Wednesday that it has so far earned $400-million in dividends this year from Citgo.

The states where Citgo will stop selling gasoline are Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma and South Dakota. A limited number of stations in Illinois, Texas, Arkansas and Indiana will also be affected.

Venezuela is the world's fifth-largest oil exporter, and the United States is its top buyer. The United States relied on Venezuela for about 11 percent of its oil supply in 2005.

[Last modified July 13, 2006, 06:22:01]