In the News

Concerns mount over Citgo's future in face of Venezuelan crisis

By Jordan Blum

November 29, 2017

Concerns are mounting in Texas and Washington about the state of Citgo Petroleum, its refineries and its 4,000 U.S. employees following the recent arrests of the company's top executives in Venezuela as the nation's political and economic crisis spills over to the Gulf Coast.

Citgo, headquartered in Houston, is the U.S. subsidiary of Venezuela's state-owned oil company, PDVSA, and increasingly enmeshed in President Nicolas Maduro's efforts to consolidate power in the face of an economic collapse, shortages of basic goods and growing opposition. The arrests of the six Citgo executives, including its acting president, were followed by the installation of Asdrubal Chavez, a cousin of the Maduro's mentor, the late Venezuelan president Hugo Chavez, as the new Citgo president, as well as the appointment of a new oil minister, Major General Manuel Quevedo.

On Wednesday, Texas senators John Cornyn and Ted Cruz said they're deeply troubled about the impact of the turmoil on Citgo's operations and future. The Trump administration, meanwhile, said it is seeking access to the arrested executives, five of whom are U.S. citizens, under the Vienna Convention on Consular Relations. Earlier this year, following Marduro's arrests of opposition leaders, the administration threatened new sanctions against Venezuela.

"The recent detainment by the Venezuelan government of six Citgo employees - five U.S. citizens and one permanent resident who live in Texas - is deeply troubling," Cornyn and Cruz said in a joint statement. "We are glad the administration is taking these actions seriously, and hope that the government of Venezuela allows these Texans their rightful access to consular affairs."

The five U.S. citizens also hold Venezuelan citizenship.

Citgo is more than 100 years old, but was acquired nearly 30 years ago by PDVSA. The company has roughly 160 branded gas stations in the Houston area, and about 5,500 nationwide. Citgo owns oil refineries in Corpus Christi, Lake Charles, Louisiana, and Illinois.

Venezuela, which sits on the world's largest proven oil reserves, is also the third largest exporter of oil to the United States and a key supplier to Gulf Coast refineries which are built to process heavier grades of crude, such as those produced in Venezuela.

The Citgo executives arrested include acting president Jose Angel Pereira, vice presidents Tomeu Vadell, Jorge Toledo, Gustavo Cardenas, Jose Luis Zambrano, and Corpus Christi refinery general manager Alirio Zambrano. Citgo hasn't commented since last week, when a Houston-based spokesman said company is monitoring the situation closely and continuing to operate independently as a U.S. company.

Kurt Barrow, an oil market analyst at IHS Markit, a research and consulting firm, said Citgo should be able to operate normally in the short-term, but long-term is less certain. Among the questions is whether Venezuela, said to be on the brink of bankruptcy, will provide necessary money to maintain and improve its refineries and recruit and retain workers, Barrow said.

It's probably safe to assume that Citgo employees are keeping their resumes updated, he added. "What I'd be concerned about is morale and the ability to backfill for employee departures and retirements," Barrow said.

Despite the charges of corruption, Ethan Bellamy, an energy analyst at Robert W. Baird & Co., said the arrests of Citgo executive appear politically motivated. He said that Maduro's moves could ensure there are no more foreign investments in Venezuela for a generation.

U.S. Rep. Pete Olson, R-Sugar Land, who sits on the House Energy and Commerce Committee, said he's horrified by the actions of the Maduro regime.

"I view this turmoil as a symptom of the current government," he said. "I want nothing more than for the Venezuelan people to find a path to peace, prosperity and democratic freedoms, and I hope that a fair and functional Citgo can be a part of that future."

Laura Murillo, chief executive of Houston Hispanic Chamber of Commerce, said the Citgo arrests hit close home. The executives are local residents who have children attending Houston-area schools. The Houston area had a growing Venezuelan population, especially in Katy, and Citgo was seen as a point of pride in the community, Murillo said.

Houston Astros superstar Jose Altuve, a native of Venezuela, is even a prominent Citgo spokesman.

Venezuela and PDVSA are in debt to Russia and Russia's state-owned oil company Rosneft. The Russians and Venezuelans have had talks about Rosneft taking control of Citgo, but the White House opposes any such deal.

As pubished by the Houston Chronicle