Business

Citgo is key link between US and Venezuela

Friday, November 17, 2017

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WASHINGTON, United States (AFP) — Despite its deepening travails, Venezuela remains an important player in the United States, where it owns oil refineries and pipelines through Citgo, a unit of Venezuelan state oil company PDVSA.

PDVSA acquired 50 per cent of Citgo in 1986 from Southland Corp, which is now known as 7-Eleven, the convenience store chain. PDVSA bought the remaining stake in 1990, taking 100 per cent control of the company eight years before Hugo Chavez became president of Venezuela.

Citgo, which was founded in 1910 as Cities Service, owns three oil refineries in the United States, in the states of Texas, Louisiana and Illinois.

The plants have total refining capacity of 750,000 barrels per day, or around four per cent of total US refining production. The three refineries employ about 4,000 people.

Citgo also owns three pipelines and stakes in three more. It has 48 petroleum terminals.

The brand is known to Americans through about 5,600 Citgo gas stations around the country, but those are independently owned franchises.

In 2015, PDVSA sought to sell Citgo but was unable to find a buyer.

The refining company is an important component of the current crisis for PDVSA and Venezuela because a December 2016 restructuring of PDVSA debt offered a 50.1 per cent stake in Citgo as a guarantee in case of default. That provision in particular has unnerved US officials.

Lawmakers on Capitol Hill have pressed President Donald Trump to take steps to prevent Russian oil company Rosneft from taking control of Citgo assets in the event of a debt default. Rosneft holds much of PDVSA's debt.

Citgo donated US$500,000 to fund Trump's January 2017 inauguration ceremony, making the Venezuelan company one of the top 20 donors, campaign documents showed.

Citgo's contribution was on par with those of Microsoft, bankers JP Morgan Chase, and oil giants Exxon and Chevron.

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