Venezuela’s government has confirmed that it is considering the sale of its oil refining and distribution network in the US amid a worsening economic crisis.
Analysts said the proposed sale reflects the socialist government’s urgent cash shortage.
Last week, the state-owned oil company Petroleos de Venezuela SA signaled its interest in finding a buyer for US-based Citgo Petroleum Corp in a bond prospectus. On Tuesday, Venezuelan Oil Minister Rafael Ramirez said Venezuela would sell Citgo if the price was right, but added that the government was not in a hurry to make a deal.
The company, believed to be worth as much as US$15 billion, has long been an unloved stepchild of the revolution. Former Venezuelan president Hugo Chavez called Citgo a “bad business” that contributed to the tax coffers of the US and made no profit for Venezuelans.
He repeatedly proposed selling the company, which operates refineries in Texas, Louisiana and Illinois and sells fuel through thousands of gas stations. Rival Gulf Coast refiners are seen as potential buyers.
Venezuela, an OPEC member that has among the largest oil reserves in the world, is struggling to overcome an economic crisis after years of overspending that has fueled inflation now at more than 60 percent. The government has restricted Venezuelans’ ability to obtain US dollars as oil production has declined, forcing imports to fall and leading to record shortages in an oil-dependent economy with a weak manufacturing sector.
Analysts based outside the country say Venezuelan President Nicolas Maduro needs to loosen currency controls to restore balance to the economy.
However, the government’s willingness to sell Citgo suggests a strong aversion to taking such dramatic steps an analyst at the Washington-based Eurasia Group Risa Grais-Targow said.
The editor of the oil trade publication Energizing Ideas Juan Carlos Sosa said the sale of Citgo would give the government financial breathing space, but could rob the country of a major source of income over the long term.
Much of Venezuela’s oil goes to domestic consumption and to supply agreements with China, Cuba and other Caribbean allies. The barrels sold by Citgo in the US market represent the only oil sold with net income, Sosa said.
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