Citgo(Redirected from Cities Service)
Citgo Petroleum Corporation (or Citgo) is a United States-based refiner, transporter and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. Headquartered in the Energy Corridor area of Houston, Texas, it is majority-owned by PDVSA, a state-owned company of the Venezuelan government.
|Industry||Oil and Gasoline|
|Founded||1910 Bartlesville, Oklahoma, U.S.|
|Headquarters||Houston, Texas, U.S.|
|Asdrúbal Chávez, President and CEO|
|Products||Fuels, lubricants and petrochemicals|
|Revenue||US$32.028 billion (2004)|
|US$801 million (2008)|
|Owner||Petróleos de Venezuela, S.A.|
Number of employees
Cities Service periodEdit
The company traces its heritage back to the early 1900s and oil entrepreneur Henry Latham Doherty. After quickly climbing the ladder of success in the manufactured gas and electric utility world, Doherty in 1910 created Cities Service Company to supply gas and electricity to small public utilities. He began by acquiring gas-producing properties in the mid-continent and southwest.
The company then developed a pipeline system, tapping dozens of gas pools. To make this gas available to consumers, Doherty moved to acquire distributing companies and tied them into a common source of supply. Cities Service became the first company in the mid-continent to use the slack demand period of summer to refill depleted fields near its market areas. Thus, gas could be conveniently and inexpensively withdrawn during peak demand times. In 1931, Cities Service completed the nation's first long-distance high pressure natural gas transportation system, a 24-inch pipeline 1,000 miles long from Amarillo, Texas to Chicago, Illinois.
A logical step in the company's program for finding and developing supplies of natural gas was its entry into the oil business. This move was marked by major discoveries at Augusta, Kansas, in 1914, and in El Dorado a year later. In 1928 a Cities Service subsidiary, Empire Oil & Refining, discovered the Oklahoma City field, one of the world's largest. Another participated in the discovery of the East Texas field, which, in its time, was the most sensational on the globe.
Over three decades, the company sponsored the Cities Service Concerts on NBC radio. The long run of these musical broadcasts was heard on NBC from 1925 to 1956, encompassing a variety of vocalists and musicians. In 1944, it was retitled Highways in Melody, and later the series was known as The Cities Service Band of America. In 1964, the company moved its headquarters from Bartlesville, Oklahoma, to Tulsa.
At the height of Cities Service's growth, Congress passed the Public Utility Holding Company Act of 1935, which forced the company to divest itself of either its utility operations or its oil and gas holdings. Cities Service elected to remain in the petroleum business. The first steps to liquidate investments in its public utilities were taken in 1943 and affected over 250 different utility corporations.
At the same time, the government was nearing completion of a major refinery at Rose Bluff just outside Lake Charles, Louisiana, that would become the foundation of the company's manufacturing operation. Using designs developed by Cities Service and the Kellogg Co., the plant was dedicated only 18 months after groundbreaking. A month before Allied troops landed in France, it was turning out enough 100-octane aviation gasoline to fuel 1,000 daily bomber sorties from England to Germany. Government funding through the Defense Plant Corporation (DPC) also prompted Cities Service to build plants to manufacture butadiene, used to make synthetic rubber, and toluene, a fuel octane booster and solvent.
In the years that followed, Cities Service grew into a fully diversified oil and gas company with global operations. Its green, expanding circle marketing logo became a familiar sight across much of the nation. During this time CEOs such as W. Alton Jones and Burl S. Watson ran the company.
Cities Service Company inaugurated use of the Citgo brand in 1965 (officially styled "CITGO") for its refining, marketing and retail petroleum businesses (which became known internally as the RMT Division, for Refining, Marketing and Transportation). CITGO continued to be only a trademark, and not a company name, until the 1983 sale of what had been the RMT Division of Cities Service to Southland Corporation (now 7-Eleven Inc.).
Demise of Cities Service and birth of Citgo Petroleum CorporationEdit
In 1982, T. Boone Pickens, founder of Mesa Petroleum, offered to buy Cities Service Company. Citgo responded by offering to buy Mesa, which was the first use of what became known as the "Pac-Man defense" take-over defense; i.e., a counter-tender offer initiated by a takeover target. Cities Service also threatened to dissolve itself by incremental sales rather than being taken over by Mesa, stating that it believed that the pieces would sell for more than Pickens was offering for the whole. Cities Service Company located what they thought would be a "white knight" to give them a better deal and entered into a merger agreement with Gulf Oil Corporation. Late in the summer of 1982, Gulf Oil terminated the merger agreement claiming that Cities Service's reserve estimates were over-stated. Over fifteen years of litigation resulted. (For a more detailed discussion of the Cities Service vs. Gulf Oil litigation, see Gulf Oil#Demise.) Ironically, two years later, Gulf Oil itself would collapse as a result of a Pickens-initiated takeover attempt.
In the chaos that ensued after Gulf Oil's termination of its deal, Cities Service eventually entered into a merger agreement with, and was acquired by, Occidental Petroleum Corporation—a deal that was closed in the fall of 1982. That same year, Cities Service Company transferred all of the assets of its Refining, Marketing and Transportation division (which comprised its refining and retail petroleum business) into the newly formed Citgo Petroleum Corporation subsidiary, to ease the divestiture of the division, which Occidental had no interest in retaining. Pursuant to an agreement entered into in 1982, Citgo and the Citgo and Cities Service brands were sold by Occidental in 1983 to Southland Corporation, original owners of the 7-Eleven chain of convenience stores.
Fifty percent of Citgo was sold to Petróleos de Venezuela, S.A. (PDVSA) in 1986, which acquired the remainder in 1990, resulting in the current ownership structure. In September 2010, in connection with the centennial of its original owner, Cities Service Company, Citgo unveiled a new retail design. Within five years, Citgo planned for all locations to display the new street image.
In October 2010, then President of Venezuela, Hugo Chávez, announced the intention to have PDVSA sell its Citgo subsidiary calling it a "bad business" and citing low profits since 2006. The minimum sale price was set at 10 billion US dollars; however, PDVSA has been unable to find a buyer at that price. It was confirmed in January 2015 that Citgo would not be sold, but rather bonds were sold by Citgo to give a dividend to PDVSA. The Bonds sold included a $1.5bn five-year bond and a $1.3bn term loan to be fully repaid in three and a half years.
Following arrests of Venezuelan oil executives seen as a purge designed to bolster more economic power behind President of Venezuela Nicolás Maduro, Asdrúbal Chávez, the cousin of late Venezuelan president Hugo Chávez, was installed as president of Citgo in November 2017.
Citgo also has a much earlier connection to Venezuela, dating to the turn of the 20th Century. Predecessor Warner-Quinley Asphalt's principal business was competition to the "Asphalt Trust" by means of a bitumen resources concession it held in Venezuela.
Crisis in VenezuelaEdit
Following the death of Hugo Chávez in 2013, his successor Nicolás Maduro oversaw the worst crisis in Venezuela's history as a result of Chávez's policies and Maduro's continuation of them. The destabilized economy resulted in hyperinflation, an economic depression, shortages in Venezuela and drastic increases in poverty, disease, child mortality, malnutrition, and crime. As a result of the crisis, Venezuela's debt to China and Russia – two political allies – increased. Due to the financial burden of this debt, Venezuela offered Citgo as collateral for Russian debt in 2016, raising the possibility that the Russian government could own Citgo due to Venezuela's high risk of default.
United States–Venezuela relationsEdit
Texaco sold some Citgo gas stations in the southeast when Chevron gained exclusive rights to the Texaco brand name in the U.S. in June 2006. On September 27, 2006, the 7-Eleven chain of convenience stores announced its 20-year contract with Citgo was coming to an end and would not be renewed. 7-Eleven spokeswoman Margaret Chabris said "Regardless of politics, we sympathize with many Americans' concern over derogatory comments about our country and its leadership recently made by Venezuela's president. Certainly Chavez' position and statements over the past year or so didn't tempt us to stay with Citgo."
Citgo launched a national ad campaign in the fall of 2006 emphasizing the company's corporate social responsibility. National television ads featuring Joe Kennedy also aired through February 2007 featuring ordinary Americans thanking Citgo and Venezuela for providing discounted heating oil to low-income people.
Environmental and safety concernsEdit
During the 2000s, Citgo faced several legal actions over the operation of its Corpus Christi, Texas oil refinery. In 2007, it was convicted of a violation of the Clean Air Act for operating an oil-water separator without proper pollution-control equipment. It was found not guilty of a charge of emitting illegal levels of benzene into the environment. In 2009, a fire at the alkylation unit of the same plant resulted in the release of toxic hydrofluoric acid and the injury of two workers, one with severe burns. In February 2011, the company was fined over $300,000 for the incident.
Citgo has been cited by environmentalists for using crude oil from the Amazon region, at their Corpus Christi and Lake Charles refineries in particular. In 2015, the Corpus Christi refinery was processing 16,337 barrels of crude oil per day coming from the Amazonian rainforest.
Possible sale to RussiaEdit
In a 2016 deal, Venezuela offered Russia 49.9% of Citgo as collateral for a $1.5 billion loan. Due to the poor state of Venezuela's economy, which includes a high risk of default, it is possible the Bolivarian Government of Venezuela may give Citgo to Rosneft, Russia's government-run oil company. Both Republicans and Democrats in the United States urged oversight on this deal, describing CITGO's sale to Russia as a risk to the national security of the United States.
In 1901, the Warner-Quinlan Asphalt Company purchased several properties in Linden for use as an asphalt manufacturing plant at the Tremley Point development, later a part of the planned Montgomery Terminal. In 1937, Cities Services took over substantially all assets of Warner-Quinlan under a bankruptcy reorganization, including the Linden plant. The plant suffered several major fires and explosions. A tank exploded in July 1914, and two major fires occurred at the plant, one in June, 1921 (still under Warner-Quinlan), and another in October, 1938 (under Cities Services). The 1921 fire destroyed almost the entire plant.
Citgo has sponsored several motorsport ventures. The company was a sponsor of the #21 Wood Brothers racing team in NASCAR for many years, with drivers such as Michael Waltrip, Elliott Sadler, Kyle Petty, Neil Bonnett, Morgan Shepherd and Dale Jarrett. They also sponsored the #99 Roush Racing team of Jeff Burton from late 2000 until pulling out of the sport in 2003. The company sponsored the Citgo Pontiac-Riley of Venezuelan car driver Milka Duno in the Rolex Sports Car Series. Duno has three overall wins in the Rolex Series and finished second at the 2007 24 Hours of Daytona, becoming the highest-finishing female in the history of the famous race. Midway through the 2007 season, Citgo sponsored the #23 SAMAX Motorsport entry in the IndyCar Series for Duno. In 2008 and 2009 this sponsorship went with Duno to the Dreyer & Reinbold Racing #23 entry. She took the sponsorship to Dale Coyne Racing in 2010. Citgo is the major sponsor of Ernesto Viso of KV Racing (2012) and Andretti Autosport (2013).
Citgo is a major sponsor of the Bassmaster Fishing Tournaments, and is also the sponsor of a charity golf tournament benefiting the Muscular Dystrophy Association (MDA). The company's relationship with the MDA goes back to its 1983 purchase by Southland, an existing MDA sponsor. Citgo is MDA's biggest corporate sponsor, and its executives have appeared on the Jerry Lewis MDA Telethon. Consistent with its former sponsorship of the Boston Marathon, Citgo has for the past few years sponsored an elite level multisport team that competes in both adventure racing and triathlon events throughout the United States. The logo is seen nationally on the Boston Citgo sign during televised Boston Red Sox games at Fenway Park and locally through replica signs at other baseball grounds. In 2016, the Boston Landmarks Commission granted preliminary landmark status to the sign to study whether the sign should receive historic preservation protection as a Boston Landmark.
Donald Trump inaugurationEdit
Before it was headquartered in Houston, Citgo had its headquarters in Tulsa, Oklahoma. In 2003, the Oklahoma governor Brad Henry met an executive of Citgo to discuss possible incentives that would keep the Citgo headquarters in Oklahoma. For eight months the company debated whether to move its headquarters or to keep its headquarters in Oklahoma. In 2004 the company announced that its headquarters were moving to Houston.
At that point the company had not decided which location in Houston would have the headquarters. The company wanted 300,000 square feet (28,000 m2) of office space to house 700 employees. Citgo considered the 1500 Louisiana building in Downtown Houston, the Williams Tower in Uptown Houston, the BMC Software headquarters complex in Westchase, and the Aspentech Building in the Energy Corridor. In June of that year the company signed a lease in the five-storey Aspentech building so it could serve as a headquarters. In September 2004 the company began moving its headquarters, and by September 24th Citgo had already relocated 150 employees to the Energy Corridor offices.
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In the event that Venezuela is unable to pay off its debt to Russia, the Maduro administration is using CITGO as its guarantee. In April 2017, it was unclear how Venezuela's state-oil company PDVSA—CITGO’s parent company—would pay Russian loans. As a result, Russia’s state-oil company Rosneft could potentially own CITGO, which is based in Houston, Texas. Democrat and Republican legislators sent letters to Trump, members of Congress and senators alerting that this could pose a danger to U.S. national security should Russia acquire the company
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- Official website
- Petróleos de Venezuela (Spanish)
- Citgo Logos
- Encyclopedia of Oklahoma History and Culture - Cities Service Company
- Articles from CEOs of Citgo
- Icons Among Us: The CITGO Sign Article with slideshow
- Citizens for Environmental Justice Group concerned with environmental issues surrounding Citgo Corpus Christi refinery