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PDVSA Facing Tough Sale of Citgo, Minister Says

Petroleos de Venezuela SA, the South American country’s state oil company, is having a hard time finding suitable buyers for Citgo Petroleum Corp., its U.S. unit, said Oil and Energy Minister Rafael Ramirez.

The company, known as PDVSA, hasn’t seen direct dividends from the U.S. subsidiary since 2006, Ramirez said today in Caracas. He is also the firm’s president.

“Citgo is a horrible business,” Ramirez said. “It’s been complicated to sell, but we’re working on it. We’re going to undo the internationalization.”

Venezuelan President Hugo Chavez on Oct. 26 said that he wants to sell Citgo because of low profit at the unit’s eight U.S. refineries. Venezuela sold its stake in the German refining venture Ruhr Oel to Russia’s Rosneft Oil Co. for $1.6 billion this month. PDVSA sold oil inventories at the refining venture for an additional $800 million, Ramirez said.

“This may be part of a larger capital raising effort concurrent with their new bond issue,” said Gianna Bern, president of Chicago-based oil and gas investment advisory firm Brookshire Advisory & Research. Refining “retail assets have performed fairly poorly. Many producers are shedding retail-based assets.”

Selling Bonds

PDVSA said on Oct. 25 that it sold $3 billion of 8.5 percent bonds due in 2017 at par value to finance investments and fund social development projects.

“The challenge may be to find buyers for downstream assets when demand for refined products is still lackluster,” Bern said today in an e-mailed response to questions. “The margins are razor thin.”

In 2008, Citgo sold a pair of asphalt refineries in Paulsboro, New Jersey, and Savannah, Georgia, to NuStar LP, the pipeline partnership led by Bill Greehey.

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