Confusion surrounding Venezuelan state-owned PdV's plans to sell or maintain ownership of its US downstream subsidiary Citgo reflects a simmering internal dispute between competing factions in President Nicolas Maduro's government.
A radical faction of the ruling PSUV party that is pushing for Citgo's sale includes executive vice president Jorge Arreaza and former foreign minister Elias Jaua, according to energy ministry and presidential palace officials familiar with the internal debate.
For the radicals, the sale would raise much-needed cash while cementing the government´s longstanding effort to diversify away from the US market.
A more pragmatic, cautious faction that includes recently appointed energy and mines minister Asdrubal Chavez and PdV chief executive Eulogio del Pino is opposed to selling 100pc of Citgo.
Maduro and new finance and economy minister Rodolfo Marco Torres said separately last month that Citgo would not be sold, contradicting earlier statements from government officials.
The apparent change of heart followed a cascade in the price that Caracas was apparently asking for Citgo, starting with around $15bn at the end of July to $10bn in August and about $7bn in September.
But the plan to sell Citgo "remains in play", an energy ministry official said today. Among the companies that have shown interest in the company´s assets are India´s Reliance Industries and US firms PBF Energy, Tesoro, Marathon, Valero Energy, Phillips 66, Koch Industries and Chevron.
Senior government officials who oppose selling Citgo, like Chavez and Del Pino, do not rule out selling some of the subsidiary´s assets as part of a broader restructuring of PdV's downstream and marketing divisions. This approach would cement the government´s diversification plans, without compromising a need to maintain a secure outlet for Venezuela´s hard-to-place diluted crude oil (DCO), energy ministry officials said.
Among the Citgo assets that could be sold under this pragmatic scenario is the 167,000 b/d Lemont refinery in Illinois, because it processes lighter Canadian crudes rather than Venezuela´s DCO.
Several potential buyers have also taken a close look at Citgo's 165,000 b/d Corpus Christi refinery in Texas as part of the sale process headed by the Houston office of French investment bank Lazard.
Chavez and Del Pino, part of the pragmatic camp, want to retain Citgo's 425,000 b/d Lake Charles refinery in Louisiana because its processing units are engineered for Venezuelan heavy crudes and DCO that PdV has difficulty placing with other clients.
Beyond the supply issues, a partial or total sale of Citgo would likely be panned by holders of Venezuelan bonds, because Citgo encompasses the largest fixed assets by far that PdV has outside Venezuela. Citgo's assets are the major factor in the expected recovery value that analysts assign to PdVs bonds.
Critics say the seesawing over Citgo reflects the weakness of Maduro´s 18-month-old government, which also floated a proposal earlier this year to raise long-frozen gasoline prices, only to backpedal within weeks.
The rift within the government over the fate of Citgo includes "financial and legal issues" as well, a presidential palace official said.
The government needs to raise cash to invest in PdV's core domestic upstream and downstream sectors and to sustain extensive social spending that is a hallmark of the government of Maduro, following in the path of his long-serving mentor, late President Hugo Chavez.
Declining oil prices have accentuated the need to generate revenue. Venezuela's oil export basket price dropped to a four-year low of $72.80/bl for the week ending on 7 November.
There is also a concern among some government officials that Citgo and other PdV-owned assets in the US could be targeted for liens by creditors like ExxonMobil, which on 9 October was awarded $1.6bn in compensation for the May 2007 expropriation of its Venezuelan assets by an arbitration panel of the International Centre for Settlement of Investment Disputes (Icsid).
In the backdrop are US politics. US senator Marco Rubio (R-Florida) said in Bogota yesterday that an effort to impose limited sanctions on 21 Venezuelan government officials will likely be revived in 2015 by the Republican-controlled Senate.
Many Venezuelan expatriates, including former PdV executives who oppose the government, now live in Colombia.
Foreign minister Rafael Ramirez, who announced plans to sell Citgo in August before he was replaced as energy minister and PdV chief executive on 3 September, remains "directly involved" in the internal discussions over Citgo, energy and foreign ministry officials tell Argus.
In a sign of his enduring influence over energy and financial issues, Ramirez remains Venezuela's delegate to Opec, folding into his new foreign ministry duties a position that historically was exercised by the energy minister. He is also heading the government's efforts to secure new international loans from key allies like China.
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