Tuesday, June 3, 2008
Citgo boss says oil price squeezes refinery profits
Citgo Petroleum Corp. is off to its worst year in perhaps more than a decade as record oil prices cut into profits for gasoline and other petroleum-based products it refines and sells, Chief Executive Alejandro Granado said today in Houston. 'This year, even though the price at the pump is almost $4, this has been the worst year at Citgo Petroleum at least for the last 10 years,' Granado said during a speech at the company's supplier diversity networking event at the Marriott Westchase. Citgo, the Houston-based arm of Venezuela's state-controlled oil company, Petróleos de Venezuela, has struggled as crude prices have doubled since last year and fuel prices have not kept pace. Other major U.S. refiners, including San Antonio-based Valero Corp., have felt the same woes, with profits declining recently. Citgo is one of the nation's largest oil refiners, with a 165,000 barrel-per-day plant in Corpus Christi, a 425,000 barrel plant in Lake Charles, La; and a 165,000 barrel plant in Lemont, Ill.
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The squeeze on CITGO'S refinery profits is true. However, the sales of crude from PDVSA to CITGO, a fully-owned subidiary, ar really transfers from one Group company to another. So if CITGO is paying higher prices for its crude from PDVSA, the latter is obtaining higher prices for the crude it sends to CITGO. Your heart need not bleed for CITGO.
ReplyDeleteWhere the Group is being hurt is from the purchases of crude and products that CITGO obtains from third parties. In that case, the upstream profit resides with a seller outside the PDVSA Group.