Article from Aug 21 Venezuela pleads with US Supreme Court to limit Citgo debt auctions
Venezuela’s Government will appeal a US Supreme Court decision to limit the number of companies able to take part in a court-ordered auction of PDVSA and Citgo shares.
Venezuela’s Government will appeal a US Supreme Court decision to limit the number of companies able to take part in a court-ordered auction of shares of oil refiner Citgo’s parent company.
In a final effort to avoid crippling debt repayments, the Venezuelan Government has appealed a lower US court ruling that will enable approximately two dozen companies and other bodies to buy shares in Venezuelan state-owned PDVSA, indirect parent company of Citgo, to satisfy long-running debts.
Around $20bn (632.86bn bolivars) worth of claims are pending, Reuters reports. Companies looking to buy shares include US-based oil and gas majors ExxonMobil and ConocoPhillips. The latter is seeking $129bn from Venezuela’s Government over nationalisation of the company’s assets in the country.
Venezuela’s petition to the Supreme Court asks for a reversal of a ruling on PDVSA, arguing that it could result in Citgo’s shares being completely sold off by next summer. The petition is unlikely to be accepted. Approximately 90% of similar requests are denied by the court.
The appeal does not affect a separate case filed against Venezuela’s Government by miner Crystallex International, which seeks $970m in compensation.
The US Government has so far this year been protecting Citgo from creditors. In April, it extended a protection licence initially granted in January for three more months. This licence, which originally served to half court cases against the oil refiner, expired in July and has not been extended further.
Andres Angulo, analyst at Offshore Technology’s parent company GlobalData, said: “According to GlobalData oil and gas intelligence centers, Conoco currently has 1,977mbd [thousand barrels per day] of conventional refinery capacity. In the hypothetical case that it acquires 100% of Citgo’s shares, its capacity would increase to 2,784mbd. Currently, the company is “near the front of the line” of creditors, according to US judge Leonard Stark.
ExxonMobil, on the other hand, is the third-largest downstream player worldwide in terms of conventional refinery capacity, currently at 4,841mbd. Adding Citgo assets would represent a total 39% increase on its cooking capacity and 17% on its overall refining capacity. However, acquiring a large share of Citgo would also contradict Exxon’s energy transition strategy, which seeks to increase investment in biofuels.
PDVSA is also among the largest players in the downstream market worldwide. Citgo refineries represent around 28% of the Venezuelan state-owned company’s refinery capacity, significantly undermining its position on the market if the Citgo sale goes ahead.
The auction for PDVSA and Citgo shares is expected to begin in mid-September and could potentially break up the companies. Currently, Citgo stands as the seventh-largest refiner in the US by volume.