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New Venezuela's PDVSA supply deal with CITGO will remove 'discount'
Platts
New York
Petroleumworld.com 09 14 07
US refiner Citgo is negotiating with its Venezuela parent PDVSA on new
crude supply contracts that will eliminate the "discount" the company had been
receiving for its purchases, an official said this week.Citgo buys about 40% of its crude needs from its parent, according to
securities filings, and holds long-term supply contracts for its refineries in
Lake Charles, Louisiana, and Corpus Christi, Texas, as well as its asphalt
plants in Paulsboro, New Jersey, and Savannah, Georgia.Those supply agreements are all netback based, similar to a crude supply
contract state oil company PDVSA altered with Lyondell last year. Lyondell's
new contract uses posted Venezuela official selling prices based on Platts
assessments.Citgo is currently "revisiting" supply deals with PDVSA for Venezuelan
crude to make the relationship between the companies more transparent, said
Citgo CEO Alejandro Granado on the sidelines of a conference earlier this
week."The price should be a market price, not a discount," he said. "We're
eliminating those contracts with a discount because we should not get a
preferential decision. It's not healthy to one side or the other."The Lyondell agreement was the beginning of a move to a new monthly OSP
system by Venezuela. According to securities filings, it included "publicly
announced formula[s] for deliveries of oil destined for ports in the US Gulf
Coast and the Caribbean." PDVSA also was expected to create OSPs for
deliveries to Europe, Asia and South America.The Lyondell crude agreement with Venezuela included two formulas, one
for oil of the Merey-16 or BCF-17 type, and another for Mesa-type crude,
according to the filing.The price of Merey-16 or BCF-17 crude sold included Platts assessments
for West Texas Sour, 3% sulfur fuel oil and West Texas Intermediate. The
Mesa-type formula included Platts assessments for WTS, Light Louisiana Sweet
and 3% sulfur fuel oil.The Merey-16 formula applied to all crudes with 15-27 API and 0.6-3%
sulfur. The Mesa formula applied to crudes with gravity between 26-37 API and
containing 0.2-2.5% sulfur.Adjustments would be made to reflect differences in gravity and sulfur,
according to the agreement. The contract noted "the adjustment shall be made
with differential values published by the Ministry for each of the applicable
API and sulfur content ranges."An adjustment also would be made for oil loaded at ports in Lake
Maracaibo to reflect the value of the Bar Toll as published by Worldscale.--Beth Evans, beth_evans@platts.com
--Starr Spencer, starr_spencer@platts.comFor more news, request a free trial to Platts Oilgram News at
http://www.platts.com/Request%20More%20Information/index.xml?src=story
or subscribe now at
http://www.platts.com/infostore/product_info.php?cPath=1_29&products_id=29
Platts 13 09 07
Copyright© 2007 Platts. All rights reserved.
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