Oil Report

Citgo cuts hundreds of Louisiana contractors-sources

HOUSTON, Jan 17 (Reuters) - Citgo Petroleum Corp cut more than 500 contract maintenance workers in late December at its Louisiana refinery as part of a program to increase returns to corporate parent Venezuelan state oil company PDVSA, according to sources familiar with the company’s refinery operations.

Between 500 and 700 contractors were let go at the 430,000-barrel-per-day (bpd) Lake Charles plant, which the U.S. government lists as the nation’s third largest, the sources said. A Citgo spokesman declined to discuss operations at the Lake Charles refinery.

PDVSA is a key revenue generator financing Venezuelan President Hugo Chavez’s social development programs, but has drawn criticism for ignoring operational problems that have reduced oil and refined product output in Venezuela.

Fitch ratings last year cut Citgo’s debt rating after it took out a $1 billion loan to help PDVSA pay off debt from one of the four multibillion-dollar oil projects that Chavez took over in May.

“Citgo wants to send 100 percent of what it makes to Venezuela,” said a source. “They’re only spending what’s needed to meet legal and regulatory obligations.”

The work previously done by the contractors will be added to the duties of about 150 maintenance workers who work full-time for the Lake Charles refinery, which is the largest of the three plants Citgo owns in the United States.

Without the contractors, preventative maintenance at the refinery may fall off, the sources said.

“I don’t see how effective a maintenance program can be if you’re just chasing urgent jobs,” said a source.

PDVSA sources have told Reuters of similar problems at the company’s Venezuela-based refineries, lamenting the fact the company is carrying out “corrective maintenance” rather than “preventative maintenance.”

The contractors were originally hired to work on the refinery’s recovery from Hurricane Rita, which struck western Louisiana and east Texas on Sept. 24, 2005. They were kept on to maintain the refinery. (Additional Reporting by Brian Ellsworth in Caracas; Editing by Christian Wiessner)