January 8, 2009 / 12:20 AM / 11 years ago

UPDATE 1-Citgo reverses decision to cut oil aid to US poor

(Recasts, adds details throughout)

By Jason Szep

BOSTON, Jan 7 (Reuters) - Venezuela-owned Citgo Petroleum Corp said on Wednesday it would resume a controversial program of delivering free home-heating oil for the U.S. poor, two days after indicating the program would be scrapped this year.

A Houston unit of a state-owned company backed by Venezuelan President Hugo Chavez will supply 100 gallons of free oil to eligible households in 23 states with a target of about 200,000 homes.

“This decision is the result of a strong commitment and a big effort on the part of Citgo and our shareholder in light of the current global financial crisis and its impact on the oil industry in general,” Citgo Chairman and Chief Executive Alejandro Granado told a news conference.

The donations by Citgo Petroleum Corp, owned by Venezuelan state-owned Petroleos de Venezuela, began in 2005 at discounted prices before being expanded in 2006 to include free oil. They were worth $100 million last year.

Citizens Energy, a nonprofit distributor of the oil, said two days ago that Venezuela had suspended the program, citing the world financial crisis and slide in energy markets.

Explaining the reversal, Citgo and Citizens Energy said the Andean nation had been forced to evaluate all its social programs, including the heating initiative.

The news came as an ice storm swept parts of the U.S. Northeast and many Americans grappled with winter heating bills.

Chavez, a foe of President George W. Bush has used Venezuela’s petroleum wealth to secure closer ties with South American neighbors. In 2005 he proposed the U.S. heating oil program to trim costs for America’s poor, a group he says the Bush administration has neglected.

‘HUMANITARIAN AID’

Chavez, who in 2006 called Bush “the devil” in a speech to the United Nations, has called the heating oil donations “humanitarian aid” although Venezuela’s per capita income is about 1/10th that of the United States.

Citizens Energy, run by former U.S. Rep. Joseph Kennedy, announced the program’s suspension this week, saying the move was driven by the financial crisis and tumbling oil prices.

“I do know how hard and difficult this decision was for you and Citgo and more importantly how difficult this was for all of the Venezuelan people,” Kennedy told Granado at the news conference.

The conservative editorial page of The Wall Street Journal blasted the program in 2006 for burishing the reputation of “an anti-American tyrant at the expense of the Venezuelan people”.

Kennedy, nephew of assassinated former president John F. Kennedy, has dismissed such criticisms as “absurd.”

U.S. heating oil prices soared for the past few winters. Last July, oil prices surged to a record high near $150 a barrel. Since then oil futures CLc1 have tumbled to less than a third of that. Heating oil is down by about 30 percent from last year, according to the U.S. Department of Energy.

Venezuela, a member of the Organization of Petroleum Exporting Countries, enjoyed surging oil revenues for much of the past five years but has seen that income dwindle. (Additional reporting by Scott Malone; Editing by David Gregorio)

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