Citgo foresees Venezuela oil swaps, refinery works: CEO

US refiner Citgo has a "mission" to replenish Venezuelan fuel supply after sanctions are lifted, chief executive Carlos Jordá told Argus.

Estranged from its Venezuelan state-owned parent PdV since the US recognized an interim Venezuelan government and imposed oil sanctions in 2019, Citgo is now a de facto independent refiner, Jordá said. But the company expects to play a "bridge" role during a political transition and reconstruction period.

"We will receive Venezuelan crude oil in exchange for product, 100,000-150,000 b/d, maybe more. There is a need for that until Venezuela gets something done in the refining sector," the former PdV veteran executive said in a 20 August interview.

He noted that PdV had 1.3mn b/d of refining capacity, and Venezuela used to consume 500,000 b/d of products. But the country's economic collapse and acute fuel shortages have whittled down consumption to only around 100,000 b/d.

Venezuelan drivers now wait for hours or even days to tank up. Diesel has also grown scarce since the US banned crude-for-diesel swaps late last year.

"It is not going to be easy, but eventually something will get done with the refineries. Maybe not 500,000 b/d but 300,000 b/d of capacity will be restored. Venezuela cannot be 100pc dependent on imports," he said. "Citgo could provide a bridge for products and help someone to get those refineries started."

For Jordá, who formerly headed PdV's refining operations from Caracas, foreign investment to re-establish Venezuela's oil industry will focus upstream. "It is hard to get capital to go into refining. Look what happened in Hovensa," he said, referring to the former PdV-Hess joint venture on St Croix in the US Virgin Islands. Now in the hands of US private equity, the refurbished Limetree Bay refinery restarted early this year only to be ordered shut on environmental grounds.

Carbon tax burden

Any future arrangement with PdV would need to be arms length and make economic sense for both sides, Jordá said.

He warns that a potential carbon tax would make it more difficult for Venezuela to recover. "It could get complicated. Selling heavy oil is going to be challenging for anyone."

In practice, Citgo has already moved past its Venezuelan feedstock roots.

The company's two Gulf coast refineries, 425,000 b/d Lake Charles and 157,500 b/d Corpus Christi, were designed to process mostly Venezuelan heavy crude. In response to changing market conditions, Lake Charles has been reconfigured to take 90-95pc light crude, while Corpus Christi is up to 65pc, and would go higher if debt-burdened Citgo had the access to capital to pay for it, Jordá said.

Citgo now processes mostly US crude, topped off with Colombian, Mexican and Canadian grades.

Like its US peers, Citgo is restricted from supplying Venezuela so long as the sanctions are in place. And even though the US recently authorized LPG sales to Venezuela, Citgo is not a specialized LPG supplier. Even if it were to step in, Jordá said a continued ban on swaps thwarts any deal, because suppliers would need cash prepayment, which PdV is unlikely to provide.

By Patricia Garip