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Lyondell / CITGO "weigh" sale of Lyondell refinery – Potentially $3B

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Charles Randall

 Lyondell / CITGO “weigh” sale of Lyondell refinery – Potentially $3B
It appears that Lyondell may be ready to take their money (potentially $3Billion) from the sale of its only refinery = Lyondell-Citgo JV while market is at the top & run. Its been in the process ever since PDVSA/Citgo showed up uninvited with Petrobras in toe to buy a portion of the refinery (which would have opened its long term crude supply contract for re-negotiation) and Lyondell wasn’t interested at that time, and of course the ongoing disputes over the crude supply contract – which seem to be settled for now.

I have mentioned in the past that PDVSA via its US Citgo arm will likely try to sell both Lyondell & Citgo Lemont refineries on its first round of liquidating US assets because of the low priced crude contract with Lyondell & the low amount of Venezuelan crude that Lemont is able to process due to its remote location from Gulf.  But both PDVSA and Citgo have been quick to deny any intention to selling off U.S. assets, but it is clear that if Chavez & Pdvsa are to continue the tough approach on investments and Venezuelan JV assets the exposure from seizure of US assets needs to be minimized, and of course the proceeds reinvested into PDVSA projects since they are driving off their past potential investors with tariffs, taxes and minimized ownership postions on future projects.

The short list of buyers for Citgo (PDVSA) portion (31.25%) are Lyondell (58.75%) of course, ConocoPhillips, Valero, Marathon & Sunoco but the article mentions there might be some concern over Lyondell being used as lever to optimize the sale price. <Should also be some concern for what happens to price of Venezuelan crude supply once sale happens and contract is opened – the low price has been one reason the 265MBD refinery earnings have done so well>.  Todays market with volatile Nat Gas prices seems suited to a returned integration between chemical plants and refineries where they have opposite market cycles that offset and compliment each other – it might be a sale that Lyonell the 3rd largest chemical maker could regret in the future.

The lack of the refinery industry to gain permits to build new refineries this presents a windfall (albeit expensive one) opportunity for the larger companies to get production now and reap profits on an undersupplied market until some of the expansions begin coming online in 2008-2010.


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