The Long And Winding Road – New Twist Adds Uncertainty to Auction for CITGO’s Three U.S. Refineries

The eight-year legal clash over the coveted CITGO refinery assets just took another unexpected turn, leaving the potential sale up in the air. The winner of the auction for CITGO’s three large U.S. refineries, related pipelines and terminal assets remains uncertain as the auction faces additional legal hurdles. In today’s RBN blog, we’ll dive into the latest in the court case and what it could mean for the three refineries involved, which have a combined capacity of more than 800 Mb/d.

Let’s start with some background. As we detailed in I’ll Be Around, there’s been a primarily below-the-radar battle playing out in the U.S. District Court for the District of Delaware since 2017 about how best to help satisfy the claims of a dozen-plus creditors who collectively lost more than $20 billion when the government of Venezuela — the de facto owner of CITGO Petroleum and its parent company, PDV Holding (PDVH) — defaulted on its bonds. (In 2019, control of CITGO was transferred away from the ruling Maduro regime in Venezuela to the opposition “shadow” government, then led by Juan Guaidó.) In May 2021, U.S. District Court Judge Leonard P. Stark appointed Robert B. Pincus as a special master tasked with devising a plan to sell PDVH/CITGO to satisfy at least some portion of the outstanding claims. After a two-round bidding process that concluded in June 2024, Pincus recommended in September 2024 that the district court approve Amber Energy, an affiliate of Elliott Investment Management, and its $7.3 billion bid for CITGO and its three refineries (Lake Charles, LA; Lemont, IL; and Corpus Christi, TX). However, instead of ending the drama, the court restarted the bidding from scratch in December 2024, citing issues with the auction process.

As a result of the new bidding round, the court in July recommended a $7.4 billion bid from Dalinar Energy, the U.S. subsidiary of Canadian miner Gold Reserve. But by August 30, that deal was overtaken by what the court described as a “superior” proposal from Amber Energy — even though its bid included less cash. (Amber’s offer included $5.86 billion in cash and $2.86 billion in strategic debt settlements; together with $105 million of break fees paid to writ holders, it equates to a total value of $8.821 billion.) Pincus approved Amber’s bid, saying that Dalinar’s proposal did not match or exceed it despite a last-minute attempt to improve the terms. (Dalinar later raised its bid to $7.9 billion.)

Now, several parties are pushing to scrap the auction and start from scratch (again). Judge Stark heard testimony on October 21-22 from CITGO, PDVH and the Venezuelan government, which argued that Amber Energy’s bid is far too low. Attorney Nathan Eimer, representing Venezuela, called Amber’s bid “so low … that it shocks the conscience of this court.” They also said the sale process discouraged competition and that Amber’s separate bondholder payment does not help Delaware creditors.

Gold Reserve and the Venezuelan government have asked Judge Stark to disqualify Pincus and his advisers, claiming conflicts of interest.  They argue that the firms Pincus hired to advise the court — Weil, Gotshal & Manges and Evercore — received $170 million in fees from Elliott and affiliated bondholders, creating a conflict of interest and loyalty to Amber Energy, the bidder Pincus selected. They said the conflict of interest wasn’t properly disclosed. Pincus and his legal team deny any bias.

Judge Stark will have several options. Motions on the case were due to him by October 28 and he’s expected to rule on them in November. He could approve the Amber Energy bid or select the Dalinar Energy bid instead — either action would likely generate further objections from various parties and associated legal ripples. It’s also possible he could order a new round of the auction. But if Judge Stark agrees there were conflicts of interest, disclosure failures, or problems with the auction process, he could even start it over from scratch.

As we noted in Changes, Amber Energy and Dalinar Energy have much different visions for how they would manage the CITGO assets. Amber plans a major restructuring focused on cost-cutting, efficiency and tighter financial discipline. It said it would bring in new leadership led by refining veterans Greg Goff and Jeff Stevens, replace the current board, and streamline operations to prepare CITGO for a potential sale.

Dalinar Energy has said it intends to keep CITGO’s current management and structure in place. Although Dalinar is a new entity with no current downstream assets, its board includes several experienced professionals, including Tony Sementelli and Todd Craig, both decades-long industry veterans, most recently as senior managers at Flint Hills Resources, and James Rhame, who has been in various senior management roles at Motiva, Shell, Flint Hills and Vertex Energy.

The winner of the auction will get three impressive U.S. refineries (dark-blue refinery icons in Figure 1 below), in addition to a number of lubricant plants, terminals and pipelines. It’s possible that whoever ends up as the final owner could opt to divest one (or all) of the refineries. We should also note that while we forecast some refining capacity to shut down in the U.S. in the coming years, we expect all three CITGO refineries to survive over the next two decades due to their relative competitiveness. Let’s look a little more closely at the three refineries next, all of which are discussed in much more detail in our Future of Fuels Report.