US actions to take over Venezuela's oil sector have thrown a new twist into the years-long saga to auction off US refiner Citgo as part of a court-mandated sale.
Citgo's three US refineries — the 460,000 b/d Lake Charles refinery in Louisiana, the 165,000 b/d Corpus Christi plant in Texas and the 188,000 b/d Lemont refinery in Illinois — as well as its lubricant plants and midstream and retail assets, are being auctioned off to satisfy debt defaults and expropriations owed by Venezuela's state-owned PdV Holdings, the parent company of Citgo.
A US federal judge in November affirmed as winner a $5.9bn bid from Amber Energy, an affiliate of New York hedge fund Elliott Investment Management. Amber's bid included a separate agreement to settle litigation claims with 75pc of a group of PdV bondholders for $2.13bn. The deal with the bondholders was a key factor in the court's selection of the Amber bid, especially after a separate court in New York in September upheld the validity of the defaulted Venezuelan bonds, rejecting an argument from PdV that the bonds were not authorised.
Elliott could be a big winner in the aftermath of the US capture of Venezuelan president Nicolas Maduro, if it leads to more Venezuelan crude flowing to the Citgo facilities specifically adapted to handle it. This would indirectly help to raise the value of the refiner — but the outcome of the Citgo sale is uncertain.
Even though it is owned by PdV, Citgo has operated under a board appointed by the Venezuelan opposition and vetted by the US government since 2019, after the US rejected Venezuela's 2018 presidential election as illegitimate. Lawyers representing Venezuela and PdV have asked a federal appeals court to vacate the pending court-ordered sale, alleging that the $5.9bn price in the Elliott bid was "grossly inadequate" and that the process of the auction was tainted by conflicts of interest and legal flaws, according to documents filed this month to the US Court of Appeals for the Third Circuit.
The previous frontrunner in the sale, Bermuda-based mining firm Gold Reserve, is also appealing the Citgo sale order, alleging conflicts of interest by court-appointed special master Robert Pincus and a lack of adherence to Delaware law. Pincus refutes the charges and motions to remove him were rejected by the lower court. The US Court of Appeals for the Third Circuit on 7 January asked President Donald Trump's administration to address whether the capture of Maduro and its aftermath will influence the Citgo auction appeals, as well as other related cases.
Asset protection
The Citgo sale is still subject to regulatory approvals, including by the US Treasury Department's Office of Foreign Assets Control. The US in December extended protections that shield Citgo from being taken over by PdV bondholders — they have been in place for more than six years through extensions.
US energy secretary Chris Wright said earlier this month that it was "fantastic" to take Venezuelan-owned refineries in the US "legally through an auction process and transfer them to American owners and American entrepreneurs in the refining business". The US administration wants those assets "to get as much money as possible" back to the creditors of the Venezuelan government, Wright said. In addition, it wants "American refinery assets owned by Americans that are going to increase throughputs and drive down the price of gasoline", he said.
Coincidentally, a former vice-president of Citgo, Calixto Ortega, will leave his post as head of Venezuela's central bank to lead its international investment agency, as Caracas comes under pressure from the Trump administration to open up to foreign investment. But the agency's role is unclear, as Venezuelan law and sanctions from the US and elsewhere have limited international investment there.
