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Venezuela reaches settlement with Canadian miner to avert Citgo default

Washington — Venezuela has reached a settlement with Canadian gold miner Crystallex to hold onto its US refiner Citgo, but will have to stay on top of payments through early 2021 to protect the crucial refining assets.

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PDVSA's control of Citgo, the state-owned company's most valued asset, was thrown into uncertainty in August when a US judge said the defunct Crystallex could go after the Citgo shares to collect on a $1.2 billion judgment related to Venezuela nationalizing its mine. Venezuela has paid Crystallex $500 million of the total judgment, which has grown to $1.4 billion with interest. A January 10 deadline looms for the next payment, and Venezuela can only use one 30-day remedy period per calendar year if it misses a payment, according to court documents.

Crystallex CEO Bob Fung said Monday that if Venezuela fails to post collateral by January 10 to secure the remaining payment it owes, Crystallex will proceed with the court action to execute on PDVSA's shares in Citgo.

"If that process moves forward, the shares would be sold at auction under the auspices of the US Marshals Service in order to satisfy the remainder of Crystallex's award," Fung said in a statement.

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PDVSA depends on Citgo's three refineries (418,000 b/d Lake Charles, Louisiana; 157,000 b/d Corpus Christi, Texas; and 179,265 b/d Lemont, Illinois) for refined products and diluent. The refineries are also an important destination for PDVSA crude exports. In August, the US imported 462,000 b/d of Venezuelan crude, of which Citgo imported 141,000 b/d, the most recent US Energy Information Administration data shows.

In August, ConocoPhillips and PDVSA reached a similar agreement over a $2 billion arbitration, after ConocoPhillips starting seizing PDVSA's Caribbean export terminals to enforce its claim.

"I think this is just a truce," said Francisco Monaldi, a Latin American energy policy fellow and lecturer at Rice University's Baker Institute for Public Policy. "PDVSA will have difficulty making the payments. There are other players that have learned from this, and ConocoPhillips' strategy, that only those who kick-them-where-it-hurts, get paid something. I think this will continue to be a story."

CURACAO COURT ORDERS TANKER SEIZURE

Separately, a court in Curacao has ordered the confiscation of a Suezmax carrying 380,225 barrels of Boscan crude to pay a PDVSA debt on behalf of creditor Energy Coal, according to sources in Caracas.

The Stena Surprise has been sitting partially laden at the Bullen Bay Curacao terminal since September 30, according to S&P Global Platts trade flow software cFlow. Sources in the Americas Suezmax sector had not heard of the court confiscation.

The Stena Surprise was last booked by Tipco for a September 26 laycan to lift a 150,000-mt cargo from Bullen Bay to Kemaman, Malaysia, on contract of affreightment terms, Platts fixture logs show.

A company source from the ship's owner, Stena Bulk, declined to comment Monday.

Venezuelan oil production continues to drift closer to the 1 million b/d level, with S&P Global Platts estimating October output at 1.18 million b/d, compared with 2.35 million b/d in January 2016.

PDVSA could not be reached for comment Monday.

-- Meghan Gordon, with Mery Mogollon in Caracas and Catherine Wood in Houston, newsdesk@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com