Mergers & Acquisitions

CITGO Sale Moves Closer to Reality: Report

U.S. government shifts position on Venezuelan state-owned oil refiner, marketer
Photograph courtesy of CITGO Petroleum

CITGO Petroleum Corp. may be up for sale after the Biden administration shifted its position and will no longer protect Venezuelan state-owned oil refiner PDV Holding Inc., CITGO’s indirect parent company, from seizure and sale to satisfy creditors, according to a Wall Street Journal report.

Businesses that once partnered with Venezuela, including gold mining venture Crystallex, have targeted CITGO as the only valuable state asset they can seize through the U.S. court system as compensation for billions of dollars in unpaid claims, the report said.

Venezuela is the 100% owner of Petroleos de Venezuela S.A. (PDVSA), which in turn owns 100% of PDV Holding Inc., a Delaware corporation, which in turn owns 100% of CITGO Holding Inc., also a Delaware corporation, which owns CITGO Petroleum Corp. CITGO Petroleum is owned by CITGO Holding Inc., Houston.

Houston-based CITGO Petroleum Corp. operates three U.S. refineries, in Lake Charles, La.; Lemont, Ill.; and Corpus Christi, Texas, and wholly or jointly owns 38 active terminals, six pipelines and more. With approximately 3,300 employees and a combined crude capacity of approximately 769,000 barrels-per-day (bpd), CITGO is the fifth-largest independent refiner in the United States. CITGO transports and markets transportation fuels, lubricants, petrochemicals and other industrial products and supplies a network of approximately 4,200 locally owned and operated branded retail gas stations and convenience stores, all located east of the Rocky Mountains.

The U.S. gave control of CITGO to Venezuelan opposition leaders in 2019 as part of a pressure campaign against the country’s president, Nicolás Maduro, while imposing sanctions that prohibited creditors from foreclosing on the company, the report said.

Any change in CITGO’s control requires a license from the Treasury Department’s Office of Foreign Assets Control (OFAC), which said last year that ending the company’s Venezuelan ownership to repay creditors would undercut the U.S. interest in supporting Venezuela’s opposition movement. OFAC now “intends to implement a favorable licensing policy for license applications in connection with the execution of a sale,” according to the report, citing the Justice Department letter.

The U.S. government intends to approve the sale of Venezuela’s ownership stake in CITGO once a winning bidder emerges in a court-supervised auction process, according to filings by a special master appointed in Delaware federal court to oversee the potential transaction, said the report. The U.S. position, disclosed in a Justice Department letter dated April 7 and filed by the special master in federal court Friday, marks a new stance toward CITGO.

The special master, appointed to design a sales process for CITGO, said in court filings Friday that marketing the company to potential bidders should begin immediately because of the change in U.S. position. But a license authorizing the sale of CITGO is months away and will be issued only after due diligence on the purchaser and the transaction, said the report.

Maduro, who has outlasted U.S. sanctions to remain Venezuela’s de facto leader, condemned the potential loss of CITGO. “We indignantly reject and repudiate this robbery of CITGO by the U.S. government,” he said during a May Day speech in Caracas on Monday, according to the newspaper.

Lawyers for the Venezuelan opposition have disputed that CITGO can be ordered to the auction block by a U.S. court and are appealing recent rulings, the Journal said.

CITGO declined to comment to the Journal.

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