Washington — Citgo was able to quickly respond to a de facto ban the US imposed on crude trades with its parent company PDVSA in January, immediately boosting imports from Canada, Latin America and West Africa at its US refineries, the company's chairwoman said Wednesday.
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"That's one of the things that we managed and I think we managed it very successfully," said Luisa Palacios, Citgo's chairwoman, during an energy conference hosted by the Inter-American Dialogue.
But looming bond payments and a push by creditors to seize the company could soon spell the end of the Juan Guaido shadow government's brief control of PDVSA's US subsidiary.
"There's a world of creditors that very much want to get their hands on Citgo," said Risa Grais-Targow, director, Latin America, with the Eurasia Group. "It's [PDVSA's] one foreign asset and this is a government that owes a lot of people a lot of money."
Most pressing is a more than $900 million bond payment due later this month on PDVSA's 2020 bond, backed by a majority stake in Citgo. Control of the company's US assets, including complex refineries in Lake Charles, Louisiana, Corpus Christi, Texas, and Lemont, Illinois, are at stake.
Guaido, who is the leader of Venezuela's National Assembly and recognized by the US and other countries as Venezuela's legitimate leader, has pressed the Trump administration for an executive order that would protect Citgo from creditors and pursued a similar option with the United Nations, so far without success.
Palacios said Wednesday that Citgo has pursued an aggressive campaign to consolidate its debt, including replacing maturing $1.2 billion lines of credit with a five-year, $1.2 billion term loan, and $1.87 billion in bonds with a four-year term loan and five-year bonds.
Still, she said that it was unclear why the Trump administration would not issue such an order, since the debt is a "legacy" issue created by President Nicolas Maduro.
Such a decision would "save Citgo from Maduro's bondholders," she said.
Grais-Targow said that if the Guaido government cannot make payment on the 2020 bond, it may be able to restructure the debt with some bondholders. "But there's other claimants that want Citgo," she said.
On Monday, the US Court of Appeals for the 3rd Circuit ruled that Crystallex, a defunct Canadian gold mining company, could seek PDVSA's shares in Citgo to collect on a $1.2 billion judgment that followed Venezuela nationalizing a gold mine.
Palacios said Citgo still represents roughly 10% of total finished product exports out of the US Gulf Coast, but said this year has been a challenge for the company, primarily because it lost its biggest customer, PDVSA, when the US imposed its sanctions in January. But other factors, including the decline in Mexican crude output and production cuts in Alberta, have caused a supply crunch for heavy crudes.
"This is not the best environment, particularly for the type of refineries that we have," she said.
Palacios said Citgo's three refineries still source roughly half of their crude from the US, but have relied on some new suppliers since it lost access to Venezuelan crude in January, which accounted for about a quarter of its inputs.
Citgo has increased imports of heavy crude from Canada by about 4% so far this year compared with 2018, climbing from an average of nearly 159,800 b/d in 2018 to an average of about 165,700 b/d through the first seven months of 2019, according to the US Energy Information Administration. But that increase is taking place entirely at Citgo's Lemont, Illinois refinery, which has a 167,000 b/d capacity.
Imports of crudes at Citgo's Lake Charles and Corpus Christi refineries are down about 32% and 41%, respectively, so far year on year in 2019, the latest EIA data shows.
While these refineries are taking additional cargoes from Colombia, Trinidad and Tobago and Brazil, imports at the Lake Charles facility fell from nearly 140,800 b/d in 2018 to 95,900 b/d so far this year, and imports at Corpus fell from 109,000 b/d to nearly 64,000 b/d, according to EIA.
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