Venezuela Makes Multimillion-dollar Payment To Retain Citgo

(Houston Business Journal, Olivia Pulsinelli, 28.Nov.2018) — Houston-based refiner Citgo Holding Inc. will remain owned by Venezuela’s state-run oil company, Petróleos de Venezuela SA, if PDVSA follows through with the terms of a settlement.

According to multiple reports, the settlement will resolve an arbitration claim from Crystallex International Corp., a defunct Canadian gold mining company. The arbitration claim was for about $1.2 billion, and another $200 million in interest was awarded by a World Bank arbitration tribunal in 2016, Reuters reported in August. At the time, a judge allowed Crystallex to pursue obtaining the shares of Citgo it was granted as payment of the arbitration award. However, PDVSA said it would appeal.

Now, Bloomberg reports that the appeal was denied in October, and Venezuela in November paid an initial $425 million to Crystallex, which will suspend all enforcement efforts until at least Jan. 10. At that point, Venezuela will have to post collateral to secure the balance, which will be paid in installment by early 2021.

Citgo is expected to worth as much as $8 billion, per Bloomberg.

Venezuela and PDVSA have been plagued an economic crisis exacerbated by the drop in oil prices that began in 2014 as well as government corruption in the country. In January, Venezuela appointed Asdrúbal Chávez, a former oil minister and cousin of the late president Hugo Chávez, as Citgo’s president and CEO. Last November, Venezuelan authorities detained Citgo’s former acting president, Jose Pereira, and five of its board members. At the time, Citgo’s intelligence agency claimed the executives “tried to defraud the nation through a planned $4 billion financing deal with three little-known foreign investment funds,” according to the Wall Street Journal.

The country’s ordeals also have affected other Houston-based companies.

In August, PDVSA and Houston-based ConocoPhillips (NYSE: COP) signed a settlement agreement in which ConocoPhillips will recover a $2.04 billion arbitration award plus interest over the next few years. In February, defunct Houston-based energy company Harvest Natural Resources Inc. filed a lawsuit against three former members of PDVSA along with an oil and gas consultant living in Florida and companies related to him. However, PDVSA was not named as a defendant.

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