PDVSA Trying To Squeeze More Revenue from Citgo Contracts

PDVSA is trying to renegotiate crude supply contracts with its U.S. refining arm Citgo Petroleum Corp. as part of government efforts to increase oil revenues. "We are trying to change the structure of the supply agreements to maximize returns from the crude sales," a spokesman for the Ministry of Energy and Mines said in a statement. Under the new supply terms, Citgo would pay market prices for heavy sour oil purchased from PDVSA, rather than the discounted prices the subsidiary currently enjoys. This would give the government more oil money and increase profits for Venezuela.

Citgo officials said the company had not been contacted by PDVSA to renegotiate supply deals. In recent years, Citgo has been paying between $1.50 to $2.50 below market prices for a barrel of Venezuelan crude under current agreements. Citgo processed 413,500 barrels per day (bpd) of crude from Venezuela in 2001, primarily through long-term supply deals. The refiner is the top buyer of Venezuelan crude and an important supplier of oil products to the U.S. market.

It was not clear whether there would be an attempt to modify joint venture supply contracts between Citgo and U.S. firms, the Ministry official said. PDVSA is currently facing a lawsuit Lyondell Chemical Co. for breaking a crude sales contract at their joint venture refinery in Houston. Lyondell claims PDVSA broke its contract in recent years by reducing oil supplies in order to comply with Venezuela's OPEC quotas. Venezuela exports over 2 million bpd of crude and refined products, primarily to the United States. With Citgo, the OPEC nation controls around 1.3 million barrels per day (bpd) of U.S. refining capacity through four wholly-owned refineries and separate joint ventures.