CARACAS, Venezuela -- Venezuelan President Hugo Chavez has stepped up threats to sell off his nation's oil refineries in the United States, but some oil experts argue a quick break with the key U.S. market would hurt Venezuela, reported the Associated Press.
Tensions between the United States and Venezuela escalated with the expulsion last week of a U.S. embassy official accused of spying. In return, Washington expelled a Venezuelan official.
Chavez threatened over the weekend to sell off all of Venezuela-owned CITGO Petroleum [image-nocss] Corp.'s refineries and divert U.S. oil exports to other countries. "I could easily order the closing of the refineries that we have in the United States," Chavez said Saturday in a speech to supporters. "I could easily sell the oil that we sell to the United States to other countries in the world... [to] real friends and allies like China, India or Europe."
Chavez's threat comes amid jitters about a disruption in world oil supplies: Iran, OPEC's second-largest producer, has been referred to the United Nations Security Council over its nuclear intentions, while Nigeria has been wracked by violence.
"The United States doesn't face many alternatives at this moment" and could face a hike in oil prices if forced to find replacements for Venezuelan imports, said Carlos Rossi, an economic adviser to the Venezuelan Hydrocarbons Association. But Rossi and other experts said the bigger loser likely would be Venezuela. The South American country exports about half of its official production of 3.2 million barrels per day to the United Statesmuch of that refined by Houston-based CITGO and sold through its 15,000 retail gas stations.
Finding alternatives to Citgo's refineriesspecially designed to refine Venezuela's heavy, highly sulfurous crudewould be difficult, critics say. "If they sell these refineries, there are no other refineries in the world able to process Venezuelan crude, not in sufficient capacity," said Jose Toro Hardy, a Chavez critic and former director of the state oil company, Petroleos de Venezuela SA (PDVSA).
PDVSA has domestic refineries and smaller operations in Europe, the U.S. Virgin Islands and Curacao, but it does not have the capacity to take on CITGO's share. "You need refineries to sell oil," Rossi said. "The U.S. would feel the impact, but Venezuela would feel it much more."
CITGO paid $785 million in dividends to PDVSA in 2005revenues that Chavez's government stands to lose if it sells.
Geography also works against Chavez's threat of making a clean break with the U.S. market: an oil tanker leaving Venezuela can get to CITGO's Gulf Coast refineries in five days compared to about 30 days to travel to China.
The United States remains Venezuela's No. 1 buyer of oil. It relied on Venezuela for 10% of its oil imports in November, the latest month for which U.S. figures are available.
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