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Venezuela loses appeal to shield Citgo assets from US court auction

Highlights

Canadian miner can go after Citgo to collect $1.2 billion judgment

Platts Analytics sees Venezuelan output falling to 750,000 b/d

Washington — A US appeals court ruled against Venezuela Monday in a case that could lead to state-owned PDVSA losing control of US refiner Citgo, its most valuable foreign asset, once US sanctions are eventually lifted.

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The ruling upheld a lower court order allowing Canadian miner Crystallex to go after PDVSA's shares in Citgo to collect on its $1.2 billion judgment related to Venezuela nationalizing its gold mine.

Lawyers for both the Nicolas Maduro and Juan Guaido administrations had asked the appeals court to overturn the lower court's ruling.

But Crystallex's lawyer argued that it should be allowed to collect on its debt in the US court system regardless of the current political turmoil in Venezuela and US sanctions crippling the country's oil industry.

Francisco Monaldi, an expert on Latin American energy and a fellow at Rice University, said when the appeals court heard oral arguments in April that a ruling against Venezuela "would open a clear path toward auctioning Citgo parent company's shares."

"Unless the US government temporarily protects Citgo assets from claimants, as they did with oil assets in Iraq, there is a high likelihood that, in the near future, Citgo will be lost," he said.

US sanctions imposed against PDVSA in January blocked US imports of Venezuelan crude and exports of US diluent to Venezuela.

Before the sanctions, PDVSA depended on Citgo's three refineries for supply of refined products and diluent, and as an export destination for its crude. Citgo owns a 418,000 b/d refinery in Lake Charles, Louisiana; a 157,000 b/d refinery in Corpus Christi, Texas; and a 179,265 b/d refinery in Lemont, Illinois.

Venezuela produced 690,000 b/d of crude oil in June, down from 1.44 million b/d a year earlier, according to the US Energy Information Administration.

S&P Global Platts Analytics estimates Venezuela's production stabilized at 800,000-900,000 b/d in the second quarter and will fall to 750,000 b/d by Q4 2020.

-- Meghan Gordon, meghan.gordon@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com