CITGO Plans Billion Dollar Expenditures for U.S. Growth and Low Sulfur Fuel Compliance

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Low sulfur fuel requirements mandated by the EPA will dominate large portions of capital budgets for refiners in 2003. Industrialinfo.com has identified 40 projects at U.S. refineries, representing $1.5 billion to add or convert existing units in order to produce low sulfur fuels. This trend is expected to continue, as the majority of the refiners need to be in compliance by 2006.

The low-sulfur gasoline rule, will require refiners to reduce sulfur content to 120 parts per million (ppm) with no single gallon exceeding 300 ppm by January 1, 2004 and further reduced to 30 ppm with no single gallon exceeding 80 ppm by January 1, 2006. Some refiners, such as CITGO Petroleum Corporation (Tulsa, Oklahoma), have initiated sulfur reduction programs, while others have not decided what to do, or are banking on sulfur credits. Small refiners will be exempt from the rule.

CITGO is one of a handful of U.S. refiners who will be able to withstand the economic pressures resulting from environmental and regulatory compliance in the U.S. CITGO will ride on the strengths of its parent Petroleos de Venezuela SA (Caracas, Venezuela), the cash rich national oil company of Venezuela that owns CITGO and plans to pump megabucks into its U.S. operations to keep them compliant and provide a U.S. outlet for its heavy Venezuelan crude oil supply.

CITGO and its parent Petroleos de Venezuela SA control over 1.1 million barrels per day of petroleum refining capacity worldwide. In the U.S., Industrialinfo.com is tracking 67 CITGO facilities as part of its North American Industrial Database. This includes six refineries & asphalt plants, four lube oil & grease plants, three pipeline pump stations, and 52 refined products terminals. Most of CITGO's refining capacity is located on the Gulf Coast in Texas and Louisiana, but the company also has a refinery in Illinois and asphalt plants in Georgia and New Jersey.

CITGO is planning an ambitious capital expenditure program to meet future growth and for increasing environmental/regulatory compliance. As part of long-term goal the company hopes to command 20% of the U.S. market for asphalt products in the U.S.

It recently announced a $2.83 billion capital program over the next 5 years, including more than $1.3 billion for regulatory spending in order to comply with the EPA's low-sulfur gasoline and ultra-low-sulfur diesel rules by 2006.

Since the beginning of the year, Industrialinfo.com has researched 27 active projects located at CITGO's six U.S. petroleum refinery interests. This is included in Industrialinfo.com's Petroleum Refinery Database. These projects represent over $944 million is capital expenditures to spent over the next 2-3 years. Approximately 52% of the company's capital expenditures are going into large desulfurization projects at the company's refineries.