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Reference ID	Created	Released	Classification	Origin
06CARACAS2431	2006-08-15 21:21	2011-08-24 01:00	UNCLASSIFIED	Embassy Caracas

VZCZCXRO1158
RR RUEHDE
DE RUEHCV #2431 2272121
ZNR UUUUU ZZH
R 152121Z AUG 06
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 5869
INFO RUEHHH/OPEC COLLECTIVE
RUEHAC/AMEMBASSY ASUNCION 0681
RUEHBO/AMEMBASSY BOGOTA 6909
RUEHBR/AMEMBASSY BRASILIA 5716
RUEHBU/AMEMBASSY BUENOS AIRES 1409
RUEHLP/AMEMBASSY LA PAZ 2276
RUEHPE/AMEMBASSY LIMA 0521
RUEHSP/AMEMBASSY PORT OF SPAIN 3233
RUEHQT/AMEMBASSY QUITO 2361
RUEHSG/AMEMBASSY SANTIAGO 3715
RUEHDG/AMEMBASSY SANTO DOMINGO 0298
RHEHAAA/WHITEHOUSE WASHDC
RHEBAAA/DEPT OF ENERGY
RUCNDT/USMISSION USUN NEW YORK 0449
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY
RHEHNSC/NSC WASHDC

UNCLAS CARACAS 002431 
 
SIPDIS 
 
SIPDIS 
 
ENERGY FOR CDAY, DPUMPHREY, AND ALOCKWOOD 
NSC FOR DTOMLINSON 
 
E.O. 12958: N/A 
TAGS: ECON ENRG EPET EINV VE
SUBJECT: CITGO SELLS LYONDELL REFINERY 
 
 
This message is sensitive but unclassified, please treat 
accordingly. 
 
¶1.  (U) SUMMARY:  Energy Minister Rafael Ramirez announced 
that PDVSA's wholly owned U.S. subsidiary Citgo was selling 
its interest in Houston's Lyondell-Citgo Refinery to partner 
Lyondell Chemical Company.  The sale comes as no surprise and 
is the result of a long running dispute between the two 
partners.  PDVSA expects to clear 1.3 billion USD from the 
sale.  The deal also includes a five year supply contract 
that supersedes previous contracts.  END SUMMARY 
 
--------------------------------- 
LONG AWAITED SALE FINALLY HAPPENS 
--------------------------------- 
¶2.  (U) Energy Minister Rafael Ramirez announced on August 15 
that Citgo has agreed to sell its 41.25 percent interest in 
the Lyondell-Citgo Refinery to its partner Lyondell Chemical 
Company, which has a 58.75 percent stake in the refinery. 
The refinery, which refines heavy, high-sulfur crude oil, is 
located in Houston, Texas and has a capacity of 268,000 
barrels per day.  According to the Venezuelan press, PDVSA 
expects to clear 1.3 billion dollars from the deal after 
taxes and relevant charges.  The profits will be placed in 
the National Economic Development Fund (Fondo Nacional de 
Desarrollo Economico or Fonden).  The deal also includes a 
five year supply contract that supersedes previous contracts. 
 
 
¶3.  (U) The sale is the direct result of a long running feud 
between Lyondell and PDVSA/Citgo.  Under two contracts signed 
in 1993, Lyondell agreed to invest over 1.1 billion USD in 
the refinery so that it could refine heavy, high-sulfur crude 
oil.  Citgo agreed to contribute to the upgrading of the 
refinery and purchase the bulk of its products.  PDVSA 
committed to supply 230,000 barrels of oil per day for 25 
years.  During the period of April 1998 to September 2000, 
PDVSA declared force majeure citing OPEC quota cuts and 
reduced its deliveries.  PDVSA restored deliveries but cut 
them again in January 2002 on the same grounds.  Lyondell 
sued PDVSA but the suit was dismissed after Citgo agreed to 
sell its stake in the refinery.  On July 20, 2006 Lyondell 
announced that the parties had received offers of over 5 
billion USD for the refinery but decided not to sell out to a 
third party because the offers did not "overcome the 
significant benefit of retaining an ownership position". 
 
------- 
COMMENT 
------- 
¶4.  (SBU)  The refinery's sale does not come as any surprise. 
 The sales price also seems to be reasonable given the 
previous offers of around 5 billion USD for the entire 
refinery.  Although Citgo is still trying to sell its two 
U.S. asphalt refineries, we have not seen any indications at 
present that the BRV and PDVSA are seriously trying to sell 
Citgo.  Given the substantial profits that it is generating 
as well as the fact that it is the ideal platform for the 
BRV's subsidized heating oil/propaganda program, we do not 
expect the BRV to change its stance on Citgo in the near 
future. 
WHITAKER

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Viewing cable 06CARACAS2431, CITGO SELLS LYONDELL REFINERY