Unocal said Monday that it is negotiating the formation of a partnership with Venezuela’s national oil industry to jointly own and operate Unocal’s big refinery near Chicago.
Unocal, which has previously said it was discussing a joint venture at the refinery with a number of foreign governments, said a deal with Venezuelan Petroleum Holdings would hinge in part on a successful test run of Venezuelan crude oil at the Chicago plant.
It would be the third U.S. and sixth foreign refinery investment by the Venezuelan government, a member of the Organization of Petroleum Exporting Countries. The Venezuelans hold 50% ownership in refineries in Texas, Louisiana, Sweden and West Germany.
Unocal, meanwhile, has been moving under new Chief Executive Richard J. Stegemeier to sell assets to reduce its debt. Among other things, Unocal has put its headquarters building and other pieces of real estate up for sale.
Looking for Outlets
The modernized, 150,000-barrel-per-day Chicago refinery is to be tested to see whether it can process Venezuela’s extremely heavy crude oil. Pipelines connect the plant to the Gulf coast, where Venezuela delivers crude oil to the United States.
As with other OPEC members, Venezuela is seeking assured outlets for its crude oil at a time of world oversupply. Kuwait has extensive refinery holdings in Europe, and Saudi Arabia recently agreed to buy three U.S. refineries from Texaco.
Venezuela was also understood to be among several national companies bidding to acquire a large Tenneco refinery in Louisiana. Mobil Oil announced Monday that it was buying the Tenneco plant. But Venezuela has said it expects to announce a refinery deal soon.
Unocal, apparently responding to published reports of its talks with Venezuela, said its negotiations could lead to the transfer of its Chicago refinery and related assets to a partnership with Venezuela. The partnership would continue to manufacture and market Unocal 76 branded products in the 12-state area of the Midwest that the refinery serves, the company said. It would not elaborate.
Venezuela is the third leading foreign supplier of crude oil to the United States so far this year, behind Saudi Arabia and Canada, which are tied for first.