Potential buyers checking out two Citgo refineries

By Reuters

Nov 06, 2014 10:14 PM EST

Potential buyers from at least six leading oil companies have visited Citgo Petroleum Corp's refinery in Illinois and three firms have shown keen interest in its Texas plant, four sources familiar with efforts to sell the assets said.

It is unclear if Citgo's owner, Venezuelan national oil company PDVSA, will go ahead with a sale of its U.S. refining and marketing unit. Both Venezuela's president and finance minister have said in the past month that Citgo's assets would not be sold.

But Lazard Ltd (LAZ.N), the investment bank hired by Citgo to carry out the sale, is still marketing the refinery, three people told Reuters this week.

Visits to the Illinois refinery have been made as recently as this week, the sources familiar with the sale efforts said.

A Citgo spokesman did not respond when asked about visits to the refineries made by potential buyers.

Cash-strapped PDVSA put Citgo up for sale in September after months of rumors about the company's future. PDVSA has indicated that Citgo's U.S. assets will fetch at least $10 billion, though some analysts have said they may bring only a third of that amount.

Citgo's three plants include the 427,800 barrels per day (bpd) refinery in Lake Charles, Louisiana; the 172,045 bpd Lemont, Illinois, refinery; and the 163,000 bpd Corpus Christi, Texas, refinery. The sources did not say if potential buyers had visited the Lake Charles refinery.

Of the three, the Lemont plant is considered the most attractive as it enjoys consistent profits because it runs cheap oil from Canada's tar sands fields in Alberta, and not heavy Venezuelan crude as do the other two refineries.

Sources told Reuters that teams from the following companies have carried out detailed inspections of the Illinois refinery: India's Reliance Industries (RELI.NS), independent refiner PBF Energy (PBF.N), U.S. West Coast refiner Tesoro Corp (TSO.N), Marathon Petroleum Corp (MPC.N), Valero Energy Corp (VLO.N) and Phillips 66 (PSX.N).

Representatives from Phillips 66 visited the Lemont refinery this week, sources said.

"I don't care what they are saying in Venezuela, potential buyers are still coming in," said one of the sources.

Marathon's president and chief executive, Gary Heminger, in an interview with Reuters, declined to discuss the Citgo sale, but said the company would carefully weigh refineries on the auction block.

"We will always study and do our homework and due diligence on assets that are available," Heminger said.

Marathon, Phillips 66, Tesoro and Valero representatives declined to discuss their companies' possible interest in Citgo's assets. PBF and Reliance did not reply to requests for comment.

Some refiners take the opportunity of a site visit while a refinery is being offered for sale to gain intelligence on how a competitor operates.


The sources said the three companies showing the deepest interest in the Corpus Christi refinery are Valero, Koch Industries' [KCHIN.UL] subsidiary Flint Hills Resources [FHR.UL], and Chevron Corp (CVX.N).

Valero and Flint Hills both have plants in the Gulf Coast city.

A Chevron spokesman declined to discuss merger and acquisition activity.

Koch representatives did not reply to messages seeking comment.

Valero and Flint Hills Resources already have refineries in Corpus Christi.

The east plant of Flint Hills' 293,000 bpd Corpus Christi refinery adjoins the east plant of Citgo's refinery. Flint Hills would hope to link up the two refineries, the sources said.

While not as close physically, Valero would integrate Citgo's Corpus Christi refinery with its 200,000 bpd refinery.

Chevron has only one refinery on the Gulf Coast, a 330,000 bpd plant in Pascagoula, Mississippi. Based in California, most of the company's U.S. refineries are on the West Coast or in the Rocky Mountains.

The sources said Chevron, which was examining reliability records at the Corpus Christi refinery last month, could add a crude distillation unit at Citgo's west plant to run sweet crude from the Eagle Ford oil fields in south Texas while the existing CDU continues to run sour crude oil like that produced by Venezuela.

Crude distillation units do the initial refining of crude oil coming into a refinery and provide feedstock for all other production units.

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