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HOUSTON -- One day after announcing it was cutting 14 percent of its 13,000 service station network, Citgo Petroleum Corp. said there should be no further cuts to the network after its joint-venture refinery in Houston is sold, Reuters reported.
Citgo announced this week that it will stop supplying gasoline to more than 1,800 Citgo-branded stations and any other station that buys Citgo's product throughout 10 states and select cities in four other states as of March 31, according to news reports.
All Citgo stations in the following states will be affected: Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma and South Dakota. Select cities will be affected in: Arkansas, Illinois, Indiana and Texas.
"We are taking this action to best position the company for a strong future," CITGO president and CEO Félix Rodríguez had said in a written statement.
"CITGO's current branded sales exceed our in-house production capabilities, straining our resources and potentially compromising our ability to provide optimum service to our customers. We will be focusing on strengthening our presence in marketing areas in the Northeast, South, mid-Atlantic and portions of the Midwest that are served by our refineries in Lake Charles, La., Corpus Christi, Texas, and Lemont, Ill., while reducing the current number of branded locations in markets in which we are less efficient."
The cuts will bring demand from Citgo's branded stations in line with the gasoline produced by Citgo and U.S. joint venture refineries of its parent company, Petroleos de Venezuela S.A. (PDVSA), Venezuela's national oil company, said Bill Hatch, Citgo vice president of supply and marketing, in a conference call.
"Our footprint had gotten to the point we just had to cut back," Hatch said.
Supplying Citgo service stations beyond what its refineries produce means Citgo has to buy 130,000 barrels of gasoline each day on open markets, a move that places the company at a competitive disadvantage, Reuters said. "It was going to get more difficult with the sale of Lyondell-Citgo Refining (LP)," Hatch noted.
Lyondell Chemical Co. and Citgo announced in April plans to sell their joint-venture 270,000-barrel-per-day refinery in Houston. The Lyondell-Citgo refinery supplies between 110,000 and 120,000 barrels per day of gasoline to Citgo. Once the refinery is sold later this year, that supply will be gone, according to Reuters report.
"So we would be talking about a 250,000 (bpd) shortfall," Hatch said.
With the reduction in Citgo stations, the company's service station network will now be in balance with its production, according to Hatch, who said Citgo plans no other divestitures. Citgo has previously announced plans to sell two U.S. asphalt refineries and its interests in the two largest U.S. refined products pipelines, said Reuters.