EIA: Citgo auction process begins

The sale of Venezuela’s refining assets follows a decision by the US Treasury Department to provisionally lift most energy-related sanctions on Venezuela as part of an agreement on the country’s electoral process, although the two issues are not directly related. That change could see more Venezuelan crude oil enter the US.

In 2018, the US District Court of Delaware ordered PDV Holdings to auction off Citgo to satisfy an arbitration award granted to a Canadian mining company, Crystallex. Following that decision, other creditors have sought similar compensation from PdVSA or the Venezuelan government. On 23 October 2023, the distribution of marketing materials to potential buyers marked the formal beginning of the process to auction off Citgo, which will likely last several months. Citgo’s refinery assets possess significant coking capacity and process relatively heavy crude oil slates. All three refineries process imported crude oil, which had initially been supplied by PdVSA. Since 2019, however, Citgo refineries have switched to processing imported crude oil from other countries, particularly Colombia and Canada.

Colombia was the largest supplier of imported crude oil to Citgo refineries in 2022 (62 000 bpd) and so far in 2023 (45 000 bpd). Canada supplied 5500 bpd of crude oil to Citgo refineries in the US this year, mainly to the company’s Lemont refinery. Most of Citgo’s crude oil imports are heavy, sour grades, which accounted for all the company’s crude oil imports last year. Heavy, sour crude oil has been in short supply and has had significant price increases in recent months, despite normally selling at a significant discount to light, sweet grades.

Citgo reported no imports from Venezuela into any of its US refineries in 2023. Citgo was established as a refining and marketing arm of PdVSA in the US, and its Gulf Coast refineries have historically been the largest importers of Venezuela’s crude oil. Citgo had made significant investments in the complex refinery units needed to process the heavy, sour grades of Venezuela’s crude oil. In 2018, Citgo was the largest importer of Venezuela’s crude oil at 179 000 bpd. The company’s three refineries are its 455 000 bpd Lake Charles refinery in Louisiana, its 167 500 bpd Corpus Christi refinery in Texas, and its 182 685 bpd Lemont refinery in Illinois.

Beginning in 2020, the Treasury Department kept creditors from pursuing an auction or other settlement against PDV Holdings or Citgo. However, in May 2023, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) indicated that it would not halt an auction of Citgo or stop other negotiated settlements against PDV Holdings.

The beginning of the Citgo auction process follows a decision on 18 October 2023 from OFAC that could see more Venezuelan oil imported into the US. That decision was based on an agreement over Venezuela’s electoral roadmap, and the Treasury Department can reimplement the sanctions at any point.

If the sanctions relief remains in place, it could pave the way for additional exports of Venezuela’s crude oil beyond the partial relief granted in late 2022.

US crude oil imports from Venezuela fell sharply after January 2019 when the US imposed sanctions on Venezuela and PdVSA. After the US imposed the sanctions, all US crude oil imports from Venezuela – including volumes already in transit from the country – stopped by May 2019. Consequently, 2018 was the last full year in which the US imported crude oil from Venezuela.

The US eased those sanctions in November 2022 when OFAC granted waivers to Chevron so it could resume exporting crude oil from its joint venture (JV) operations in Venezuela to US refineries. Chevron resumed exporting crude oil from Venezuela to the US in January 2023. Data through July 2023 shows that US crude oil imports from Venezuela averaged 117 000 bpd, well below the 2018 annual average of 506 000 bpd. Chevron has imported an estimated 43 000 bpd so far in 2023, just over half of the 74 000 bpd that the company was importing in 2018. Chevron’s imports from Venezuela have primarily flowed to its refinery in Pascagoula, Mississippi.

Chevron has not been the largest importer of crude oil from Venezuela in 2023. The largest importer this year has been Valero, which imported an average of 52 000 bpd of crude oil through July 2023. Valero’s current import volumes most likely reflect cargoes purchased from Chevron, although the company also reportedly sought a sanctions exemption from the Treasury to allow it to purchase crude oil directly from PdVSA.

Valero possesses a substantial refining portfolio on the US Gulf Coast, including its refineries in Meraux, Norco, Port Arthur, Corpus Christi, Houston, and Texas City. Together, these facilities account for almost 1.4 million bpd of refinery distillation capacity. In 2018, Valero had imported an average of 179 000 bpd, more than double Chevron’s import volume and just 200 bpd less than Citgo, the largest importer from Venezuela in 2018.

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