Texas refinery to cut jobs due to Venezuela-sources

www.forbes.com Reuters, 01.10.03, 5:57 PM ET By Erwin Seba

HOUSTON, Jan 10 (Reuters) - Lyondell-Citgo Refining LP is laying off contract workers at its Houston plant and preparing further cuts as it operates at 50 percent of capacity because of a shortage of crude supplies from strike torn Venezuela, sources familiar with refinery operations said on Friday.

Lyondell-Citgo executives and officials of the union representing workers at the plant are scheduled to meet on Monday to discuss effects of the 40-day-old strike in Venezuela on plant operations, the sources said. Venezuela normally supplies about 13 percent of the United States' crude imports.

The cuts were directly related to the lack of supplies from Venezuela, the world's No. 5 crude exporter, the sources said. A Lyondell-Citgo spokeswoman did not return calls from Reuters. It is unlikely layoffs of union workers will be discussed at Monday's meeting between refinery executives and leaders from Local 4-227 of the Paper, Allied-Industrial, Chemical and Energy Workers International Union, one source said, but cancellation of bonus pay and other financial benefits may be discussed.

Officials of PACE Local 4-227 declined to comment on operations at the plant.

The national agreement between PACE and refining companies carries assurances of job security for union members while a refinery is operating.

The refinery, which has a crude oil processing capacity of 270,000 barrels per day (bpd), halved its production late last month because the supply of sour crude oil from Venezuela has been cut off by the general strike in that country.

The refinery has crude oil supplies to run at 50 percent capacity through the end of February, the sources said.

Late February may be a critical time for the refinery if the flow of sour crude from Venezuela does not resume, the sources said. They declined to say what options refinery executives have to cut costs after releasing 300 to 400 contract workers from the plant. They specifically would not comment on a possible shutdown of the plant or layoffs of union workers.

One source did say late February would at time for "hard decisions" if the flow of oil from Venezuela has not resumed. The refinery, located in the industrial section of east Houston along the Houston Ship Channel, is the hardest hit in the United States by the ongoing pollical crisis in Venezuela because one of its crude units is specifically configured to handle the sour crude oil produced from Venezuelan fields. That crude unit accounts for half the plant's crude oil throughput.

No replacement crude has been found that can successfully run in that unit, sources have told Reuters.

That crude unit has been idled and is undergoing minor overhaul work, sources said. It can be restarted in about five days, they said. Lyondell-Citgo Refining LP is a joint venture between Lyondell Chemical Co. (nyse: LYO - news - people) and Citgo Petroleum Corp. Citgo is an indirect, wholly owned subsidiary of the Venezuelan state oil company, Petroleos de Venezuela SA (PDVSA).