CITGO confirms US base oils exit

16 June 2008 22:26  [Source: ICIS news]

HOUSTON (ICIS news)-- US base oils producer CITGO confirmed on Monday it would permanently shut down its Lake Charles lube plant in Louisiana prior to year end.

“With regard to the 12,000 bbl/day base oil lubricant and wax plant, CITGO has initiated plans to cease production at the facility during the second and third quarters of this year,” company spokeswoman A Shawn Trahan said.

The confirmation followed speculation that CITGO would exit the base oils business, following a letter the company sent to buyers earlier this year about reducing production. “I think everyone saw this coming but certainly not this soon,” a major contract buyer said.

The decision was made in response to a continuing, downward trend in market conditions for CITGO’s products and an effort to remain competitive in the industry, Trahan said.

CITGO, the Houston-based arm of Venezuela's state-controlled oil company, Petróleos de Venezuela (PDVSA), has struggled along with many other refiners as crude prices have doubled since last year and fuel prices have not kept pace.

“Base oil producers are having their worst year in perhaps more than a decade as record oil prices cut into profits for refining,” a seller said.

Many producers have chosen to divert feedstock to make other refined products rather than base oils.

“But losing money is no small problem in the world of refining,” a distributor said. “We have now seen two base oil closures in the last 45 days.”

CITGO follows Marathon, which told buyers in April it would close its Kentucky lube plant by the end of the year.

CITGO said it is seeking potential buyers for the facility to better align its base oil production capacity with the needs of the finished lubricants marketplace. 

“This decision will better align CITGO base oil production … with the needs of the finished lubricants marketplace,” Trahan said.

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By: Heather McGuire Doyle
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