Citgo Petroleum’s Corpus Christi refinery in Texas has emerged as a surprise contender in a court-ordered auction to pay off over $20 billion in Venezuela-related claims. The refinery, previously considered the least profitable among Citgo’s assets, is attracting interest due to its strategic location and potential for expansion.
Prime Location Fuels Bidding Frenzy
Located on the Gulf Coast, Corpus Christi is a major hub for U.S. crude oil exports. The refinery’s proximity to key pipelines and storage facilities makes it highly attractive to potential buyers. Energy companies, refiners, and investment firms are all reportedly considering bids, with some consortia expressing interest solely in acquiring the Corpus Christi facility.
While the Corpus Christi refinery currently operates below capacity, analysts believe it has significant potential for growth, particularly in gasoline and diesel exports. The facility’s existing infrastructure, including seven docks and ample storage space, could be further developed to capitalize on rising global demand for refined fuels.
The deadline for bids in the second and final round of the court-ordered auction is Tuesday, June 11th, 2024. This marks the final step in a years-long process to compensate creditors for past expropriations and debt defaults in Venezuela. The auction is expected to result in a change of ownership for the seventh-largest U.S. refiner.
“At least a couple of consortia have shown interest in submitting bids with the only goal of keeping Corpus Christi,” said one of the sources close to the process. “It’s a major asset as seen by bidders.”
Activist investor Elliott Investment Management has been considering a bid, and investors represented by Centerview Partners have sought to lure ConocoPhillips, the largest creditor in the auction, to join their effort, according to Reuters reports from April 2024.
Citgo’s Complex Sale Process
In a unique twist, the court-ordered auction restricts offers to all shares in Citgo’s parent company, PDV Holding. This means that the winning bidder will acquire all of Citgo’s assets, including refineries in Louisiana and Illinois, and then be required to sell off any unwanted properties.
Houston-based Citgo declined to comment on the ongoing auction process. However, in recent months, the company opened a data room to provide potential bidders with access to detailed information about its operations.
Corpus Christi: A Port With Potential
Corpus Christi’s location on the Gulf Coast has solidified its position as the largest U.S. crude export hub, with a staggering 2.2 million barrels per day (bpd) moving through the port in the first quarter of 2024. The port also plays a key role in transporting fuels, with volumes reaching 932,000 bpd in 2023 according to data from the Port of Corpus Christi.
“Rapid large-scale infrastructure development, including improved dock capacity, inbound pipeline capacity from the Permian Basin, and storage capacity, has catapulted Corpus Christi into a prime position for exporting U.S. oil,” said energy consultancy Wood Mackenzie in a 2023 report.
For energy companies seeking expansion opportunities, securing access to Corpus Christi’s ports and pipelines is a significant advantage. Moreover, Citgo’s ability to handle both oil imports and fuel exports makes the Corpus Christi refinery particularly attractive.
Citgo’s Refining Network
Citgo’s refining network includes facilities in Lemont, Illinois, and Lake Charles, Louisiana, in addition to the Corpus Christi location. The Lemont refinery is typically the second-most profitable due to its access to lower-cost Canadian crudes. Meanwhile, the Lake Charles refinery is the largest and most profitable of the three.
In the first quarter of 2024, Corpus Christi contributed $128 million to Citgo’s earnings before interest, taxes and depreciation (EBITDA), compared with $383 million from Lake Charles and $227 million from Lemont. The Corpus Christi refinery also operated at a lower capacity (84%) compared to the company average of 93% in the same period. Disruptions caused by several storms since 2017 are believed to have contributed to the lower utilization rate.
Analysts believe that Citgo may not be fully utilizing the Corpus Christi refinery’s potential for fuel exports. The facility exported a total of 149,000 bpd in the first quarter of 2024, which is in line with figures from 2023. A new owner could potentially invest in improvements to increase export capacity.
Source: Reuters
