Citgo CEO Marin: Focus On Heavy-Crude Refining, Asphalt

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(WASHINGTON --DOW JONES NEWSWIRES) Citgo Petroleum, U.S. subsidiary of Venezuela's state oil company Petroleos de Venezuela SA (E.PVZ), or PdVSA, is investing in expanded use of heavy crude oil and, possibly, in raising asphalt production, the new Citgo chief executive said Wednesday.

Citgo CEO and President Luis Marin, a 23-year PdVSA executive named to his current post last month, reiterated the Venezuelan government's denial of rumors that PdVSA is considering selling the U.S. refining and marketing subsidiary, but said the Citgo is trying to cut costs.

PdVSA executives recently received an outside consultant's report on ways to rationalize operations, but they have yet to decide on what actions to take, Marin said at a press briefing.

"As a normal business you have to evaluate each of the assets, and it is a common practice that you sell and buy assets in order to keep the company running for the optimal economic return to the shareholders," he said.

Marin said PdVSA sees Citgo as a prized asset, citing the U.S. unit's recent handover to Venezuela of $500 million in profit from operations in 2002 and the first six months of 2003.

While Citgo isn't planning major expansions of its refining capacity, it is trying to increase the share of Venezuelan crude it processes and the amount of relatively low-quality heavy crude it can refine, he said.

"We need to invest in deep conversion (of heavy crude oil to lighter oil) in some of the refineries in order to process more heavy oil," Marin said. "We have already some plans for the next two years in the budget."

Citgo plans to resume later this year a project to increase the heavy crude processing capacity at its 320,000-barrel-a-day Lake Charles, La., refinery, and it is trying to make the improvements at a lower cost than the earlier projection of $200 million, he said.

The company's Corpus Christi refinery may also seen upgrades, and asphalt could be an area for expansion, Marin said.

"It looks like there is a great opportunity for asphalt, especially in the East Coast," he said, noting Venezuela has large reserves of crude of a quality that is easily converted to asphalt.

While Citgo's debt ratings have improved recently, it would make most of these investments with cash, he said.

Regarding oil trading with PdVSA in the wake of the Venezuelan oil sector crisis in late 2002 and early 2003, Marin said PdVSA is honoring all its gasoline contracts with the U.S. subsidiary, including reformulated gasoline.