Local refineries not feeling pinch of credit watch

www.zwire.com By: DEANNA SHEFFIELD, Citizen staff January 12, 2003

Lyondell Chemical officials have remained tight-lipped about Standard & Poor's recent decision to place the company under a credit watch.

Standard & Poor's red-tagged Lyondell Chemical's rating status because of concerns the company may not be able to acquire adequate supplies of Venezuelan crude for its refinery. The ratings agency remains concerned cash distributions to Lyondell Chemical may decrease well below expectations.

The designation could prove damaging for the chemical company, which at this point has retained their BB corporate credit rating. If the watch remains, Lyondell could have a difficult time securing low interest rates, assuming they still have interested lenders.

Lyondell-Citgo has already reportedly reduced its production of crude by as much as half because of the crude strike in Venezuela.

Lyondell-Equistar spokesman David Harpole declined to confirm or deny decreased production, noting only that the company "had not yet made an announcement."

Equistar Chemicals, a partner of both Lyondell and Millennium Chemical, has retained their BB corporate credit rating because Millennium provides the group with a measure of security.

During the watch period, Standard & Poor's officials will begin assessing other risk factors that may affect the company's rating.

Reported production cuts have increased concern the company may begin laying off employees. Approximately 1,000 people work at Lyondell-Citgo's refinery.

Lyondell owns 60 percent of the company. Citgo owns the remaining 40 percent, which is serviced by Venezuela's state oil company.

However, other crude refineries, including Shell in Deer Park, have not felt the crunch because they secure crude from Mexico, not Venezuela.

"I know Lyondell is having problems, but we're in good shape," said Shell spokesman Dave McKinney. "Our refineries are running normally; we're virtually unaffected by that."