July 9, 2006 at 5:28 pm #4181
By Erwin Seba Thu Jul 6, 12:57 AM ET
HOUSTON (Reuters) – U.S. refiner Tesoro Corp. is in talks to buy Lyondell-Citgo Refining L.P.’s 270,000 barrels-per-day (bpd) Houston refinery in a deal valued at $4 billion or more, according to sources familiar with the negotiations.
Tesoro wants to take ownership of the refinery, located on the Houston Ship Channel, between mid-August and late October, the sources told Reuters on Wednesday.
The plant is jointly owned by Venezuelan state oil company subsidiary Citgo and U.S. chemicals firm Lyondell Chemical Co., who agreed in April to end what has been a troubled partnership, and have put the operation up for sale. It is designed to process Venezuelan crude.
A Tesoro spokeswoman would not comment on any talks. Citgo spokesman David McCollum said “We don’t comment on on-going negotiations.” A Lyondell spokesman did not reply to phone messages.
Tesoro continues to pursue a strategy of “looking at all our options; just trying to look at everything to see what’s right for us,” said Tesoro spokeswoman Natalie Silva.
Tesoro previously said it did not want to take on the necessary debt to buy the Lyondell-Citgo refinery, which it said would be most attractive to a refiner that already has a plant along the Houston Ship Channel.
San Antonio-based Tesoro has six refineries in the western United States, Hawaii and Alaska, but none in Texas.
A Fortune 200 company, Tesoro had annual revenues in 2005 of $16.5 billion.
The troubles between Lyondell and Citgo, the U.S. refining and marketing subsidiary of Venezuela’s national oil company Petorleos de Venezuela S.A. (PDVSA), are related to strained relations between the two countries.
President Hugo Chavez of Venezuela, elected in 1998, claims U.S. oil companies have taken advantage of Venezuela.
The Lyondell-Citgo partnership to operate a refinery that processes Venezuela’s high-density, high-sulfur crude began in 1993. High-sulfur, high-density crude sells at a discount to more easily refined low-density, low-sulfur “sweet” oil.
Lyondell, which controls 58.75 percent of the partnership, wants to sell the refinery this summer. Citgo, which holds 41.25 percent of the partnership, has said it wanted to weigh bids for the refinery before a sale near the end of the year.
Tesoro grew into an independent refiner by purchasing refineries that were sold off by merging oil industry majors between 1997-2005.
In 2002, its debt to capitalization ratio reached 69 percent because of refinery acquisitions. The company paid down its debt to 36 percent of capitalization by the end of 2005.
Tesoro’s refineries have a combined throughput of 560,000 barrels and the company employs more than 4,000 people.
The Lyondell-Citgo refinery had revenues of $5.4 billion in 2004 and employs 875 people.
Analysts estimate U.S. refineries to be worth about $15,000 per barrel of daily refining capacity.
July 9, 2006 at 5:29 pm #7578
New canidate on list to buy Lyondell-Citgo – this time it’s a Lyondell pick & Citgo is dragging its feet (probably because it is an american company). Tesoro is likely to run into same problems & issues that made Valero walk away from it.
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