Venezuela owned Citgo refinery could be hard hit by US sanctions which would erode Russia's lien on their assets

Fuel Fix:
Gulf Coast refineries could suffer a blow if the United States moves forward with sanctions against Venezuelan crude oil exports.

Many refineries in Texas and Louisiana import heavy Venezuelan crude and mix it with lighter crude oil coming out of the Permian Basin and West Texas

"Venezuela is very important for oil markets, not so much the sheer volumes but rather for the quality of their crude. Sanctions would make US Gulf coast refiners the biggest loser," said Rystad Energy analyst Paola Rodriguez-Masiu in a article published by the research firm Thursday.

White House officials previously warned U.S. refineries about the potential of sanctions and advised them to look for other sources of heavy crude. Some refineries reportedly experimented with different sources last year but many ultimately returned to Venezuelan crude.

Perhaps not surprisingly the hardest hit refiner would be Citgo Petroleum Corp., the refining arm of Petroleos de Venezuela SA, or PDVSA, the state-run oil company. Citgo, headquartered in Houston, imported about 56 million barrels of Venezuelan crude in the first 10 months of last year, according to Energy Department data.
Venezuela borrowed money from Russia to cover government deficit spending and Russia took a lien on its Citgo assets as security for the loan.  If Citgo is unable to operate it would lead to a potential loss of the assets and their value to Russia would also be reduced by an inability to operate.  Other Gulf Coast refineries which use the heavy crude from Venezuela would have to find alternative sources.  Canada would be one such source but its operations are limited by the ridiculous orders to stop the Keystone XL pipeline.

The best solution for the US would be for the refineries to invest in facilities that can operate solely on the light crude coming out the shale wells.  That would enhance US national security and reduce imports.

Currently, the US supply of oil and gasoline is surging.  However, the markets are wary of the loss of the Venezuelan crude.


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