Southland to Sell 50% of Citgo Unit to Venezuela

Venezuela’s state-owned oil company will pay about $300 million for a 50% interest in Citgo Petroleum Corp., an oil refining and marketing subsidiary of Southland Corp., officials said Wednesday.

Petroleos de Venezuela S.A. and Southland, which operates 7-Eleven convenience stores, signed a letter of intent to pursue the arrangement, under which PDVSA also will provide its share of Citgo’s working capital requirements through crude oil and product supplies, the two companies announced.

Venezuela will deliver a minimum of 130,000 barrels per day of crude and other feed stocks--with an option to increase the supply by another 70,000 barrels--to Citgo at a market-related price, the statement said.

A definitive agreement is anticipated by the middle of this year, officials said.

John P. Thompson, Southland’s chairman and chief executive, said the agreement “will help ensure a long-term, competitively priced supply of crude and other feed stocks for the Citgo refinery and enhance our capability to provide an assured supply of gasoline for our 7-Eleven convenience stores.”

“In addition, under this arrangement, Citgo should be less subject to the historically cyclical nature of the refining industry,” he said.

Brigido R. Natera, president of PDVSA, said the agreement is a continuation of an acquisition program that began three years ago with a joint venture with Veba Oel AG, a West German oil company.

“This combination is particularly attractive to us because Citgo has the ability to refine substantial amounts of Venezuelan crude, in addition to having an aggressive downstream marketing operation based in part on its support of the 7-Eleven gasoline retailing operation,” he said.

Citgo was acquired by Southland from Occidental Petroleum in August, 1983.

Citgo’s Lake Charles, La., refinery complex, with a rated capacity of 320,000 barrels per day, is the ninth-largest refinery in the United States, the Southland statement said.