Lagniappe

 

 

Oliver L Campbell: PDVSA to sell
two asphalt refineries in the USA

PDVSA has been trying to sell CITGO’S two asphalt refineries for some time, and it has just been announced they have agreed to sell them to NuStar Asphalt Refining.

The rated refining capacity of the Paulsboro, New Jersey refinery is 84,000 barrels per day (b/d) and that of Savannah, Georgia is 28,000 b/d. Neither has a Solomon Process Complexity Rating because they are very simple refineries designed to produce asphalt.

In 2004, the last figures available, PDVSA supplied the Paulsboro refinery with 51,000 b/d and the Savannah refinery with 26,000 b/d of crude oil.

CITGO’S three main refineries--Lake Charles, Corpus Christi and Lemont--and its two asphalt refineries produced the following yields in 2004:

Product	Yield %	Value	Value %
Gasoline	42	17,597	55
Diesel	20	6,590	21
Jet fuel	7	2,707	8
	69	26,894	84
Asphalt	5	971	3
Petrochemical and industrial	26	4,053	13
Value in millions $	100	31,918	100

Petrochemicals include propylene, benzene, tolulene, and mixed xylenes.
Industrial products include residual fuels, sulphur and petroleum coke.

CITGO stated the sale was made “with the long-term objective of making the company more efficient and profitable, while concentrating on our core
business.” The table above clearly shows that CITGO’S asphalt business is small, providing five percent of the total refinery output and only three percent of the sales value. The “core business” is obviously selling gasoline and diesel in the service stations bearing its badge--over 75 percent in sales value.

CITGO’S asphalt business must be profitable--otherwise why would NuStar want to buy it--so why sell it? The answer it seems, and this is conjecture, is that CITGO wants to release the crude oil it buys from PDVSA for its asphalt refineries--over 70,000 b/d--and process it in its more complex Lake Charles and Corpus Christi refineries which can produce lighter fractions and so a higher income per barrel. This is a typical case of looking at the opportunity cost of producing asphalt and seeing that producing a lighter slate of products gives a better financial return.

In 2004, CITGO bought 338,000 b/d of crude oils from third parties as against 350,000 from PDVSA. More surprisingly, it bought 894,000 b/d of products from third parties--573,000 b/d gasoline, 235,000 b/d diesel and 86,000 jet fuel. However, the product volume should have gone down since then as, last year, CITGO shed some 1,800 service stations it supplied with bought-in products. These were acquired at market prices and, according to CITGO, left a negligible margin at the pump.

I regret having to bombard the reader with so many figures, but they were necessary to show that, if CITGO can produce more light fractions from the heavy crude oil PDVSA supplies, it and indeed the PDVSA Group will make higher profits.

Oliver L Campbell, MBA, DipM, FCCA, ACMA, MCIM was born in El Callao in 1931 where his father worked in the gold mining industry. He spent the WWII years in
England, returning to Venezuela in 1953 to work with Shell de Venezuela (CSV), later as Finance Coordinator at Petroleos de Venezuela (PDVSA). In 1982 he returned to the UK with his family and retired early in 2002. Petroleumworld does not necessarily share these views.

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Petroleumworld News 11/09/07

Copyright© 2007 Oliver L Campbell. All rights reserved.

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