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Citgo HQ could be moved to Aruba: officials

10 Jan 2018 16:10 GMT
Citgo HQ could be moved to Aruba: officials

Caracas, 10 January (Argus) — Citgo's corporate headquarters could be transferred from Houston to Aruba if recent tensions between Venezuela and Dutch-controlled Caribbean islands are resolved amicably, two senior Venezuelan government officials familiar with the matter told Argus.

The government of president Nicolas Maduro has been "toying with the possibility" of moving Citgo's headquarters to Aruba since 2015 because of increasingly sour diplomatic relations between Caracas and Washington, one of the senior Venezuelan officials said.

But the idea appears to be gaining traction in Caracas following Maduro's decision at end-November 2017 to name Asdrubal Chavez as Citgo's new chief executive.

Chavez, a 30-year oil industry veteran and first cousin of late president Hugo Chavez, is believed to be a central figure in the campaign to move Citgo to the tiny island, where the refiner has been seeking an operational foothold.

In June 2016, Citgo signed a lease to restart and revamp Aruba's 280,000 b/d San Nicolas refinery formerly owned by US firm Valero. A restart of the refinery, which has been mothballed since 2012, was supposed to happen in mid-2018.

Under the transfer proposal that Chavez is advocating in cabinet-level discussions involving new energy minister and PdV chief executive Manuel Quevedo, Citgo would continue to operate its refineries in Texas, Louisiana and Illinois, plus its pipelines and related distribution terminals across the US Midwest and southeast.

But Citgo's presidency and key financial executives would be based in Aruba in an arrangement the proposal's supporters believe would better insulate the company's top Venezuelan executives and finances from direct US government interference.

The idea comes against a backdrop of increasing pressure from US sanctions on individual Venezuelan officials, including Maduro, and US financial sanctions imposed in August 2017. Asdrubal Chavez is not currently on the list of sanctioned Venezuelan officials. It is unclear if he is in Houston.

PdV since late 2016 has pledged 100pc of Citgo's equity as collateral to back two major financial transactions, including a voluntary bond swap deal worth about $2.5bn, and a $1.5bn loan obtained at end-2016 from Russian state-controlled Rosneft.

Chavez was named Citgo's chief executive after Venezuelan acting attorney general Tarek Saab ordered the arrest of six senior Citgo executives in November 2017 on corruption charges related to an allegedly illegal scheme to refinance $4bn of Citgo debt without the approval of parent firm PdV's board of directors.

The six Citgo executives include former acting chief executive Jose Pereira who remains jailed in Caracas.

Saab's accusations that the six executives secretly conspired to refinance Citgo debt lost steam following the disclosure of an official PdV board of directors meeting transcript dated 14 June 2017 that shows the transaction was reviewed and approved unanimously by PdV's board.

PdV board members present at the 2017 meeting in which the refinancing proposal was approved included PdV's then-chief executive Eulogio Del Pino, executive vice president admiral Maribel Parra, current constituent assembly (ANC) president Delcy Rodriguez, Mariany Gomez, Cesar Triana, Nelson Ferrer, Yurbis Gomez, Wills Rangel, Ricardo Menendez, Rodolfo Marcos Torres, Citgo's currently jailed former chief executive Pereira, and PdV's corporate counsel Vicky Zarate. Del Pino was arrested on separate corruption charges late last year.

A move by Citgo's top brass to Aruba faces several obstacles, including the recent sharp deterioration in relations between the Maduro government and the authorities of Aruba, Bonaire and Curacao, three tiny islands with oil ties to Venezuela.

Maduro ordered the closure of Venezuela's air and sea borders with the islands on 5 January, and subsequently warned that the borders will not be reopened until island authorities meet with senior Venezuelan officials to craft a plan to disrupt illegal smuggling of coltan, diamonds and gold from Venezuela's Bolivar state to the nearby islands.

A humanitarian air bridge has reportedly been established in an apparent compromise during the regional visit of a Dutch minister in charge of relations with the islands, and a high-level meeting is supposed to take place on 12 January.

Venezuela's energy ministry is at odds with the authorities of Curacao and Bonaire over the structural deterioration of refinery and oil storage facilities leased and owned by PdV on both islands.

PdV has refused to commit to investing up to $3bn to upgrade the 325,000 b/d Isla refinery on Curacao that it operates under a lease expiring next year. PdV is also battling a decision by Bonaire's authorities to rescind PdV's license to operate its 10mn bl Bopec storage and terminal facility in February 2018 unless the Venezuelan company makes urgent repairs.

Citgo said it had no immediate comment on the proposed move.

The company owns and operates three refineries with combined crude processing capacity of 749,000 b/d including 157,000 b/d Corpus Christi in Texas, 425,000 b/d Lake Charles in Louisiana and 167,000 b/d Lemont in Illinois. Citgo's downstream assets also include three wholly owned pipelines, equity stakes in six other pipelines and 48 product terminals.