Exclusive - Citgo auction proceeds even after Venezuelan minister says canceled: sources

By Jessica Resnick-Ault and Mike Stone

NEW YORK (Reuters) - At least three oil companies are still actively bidding for Citgo Petroleum Corp, the U.S. refining arm of Venezuela's PDVSA (PDVSA.UL), even after the country's finance minister said that the auction was no longer going ahead, according to three people familiar with the situation.

The investment bank hired by PDVSA to conduct the sale, Lazard Ltd (LAZ.N), has not ended the sale process, the people said on Tuesday, and a deadline for a second round of bids is expected later this month. The people declined to be named because they were not authorized to speak publicly.

Any deal for Citgo, which could be worth as much as $10 billion (7.8 billion pounds), could help to reshape the U.S. refining landscape, giving the winning bidder access to major refining assets in the Midwest and on the Gulf Coast at a time when U.S. oil production is soaring. The Citgo refineries are in a position to access supplies of crude from U.S. Shale formations and imported Canadian crude. For Venezuela, a sale would provide much needed capital to meet its budget needs.

A Citgo representative did not immediately provide comment. Officials at PDVSA and Venezuela’s oil ministry could not be immediately reached for comment. A Lazard representative declined to comment.

Finance Minister Rodolfo Marco said in an interview published in Venezuelan media on Oct. 26 that the sale of Citgo Petroleum “has been ruled out” and the nation’s President Nicolas Maduro had “affirmed” the decision.

It was not immediately clear why Lazard was going ahead with the auction despite that declaration, and whether the process could eventually be called off.

Marco’s announcement surprised bidders who had done due diligence on the Citgo assets.

A first round of bids attracted contenders including Marathon Petroleum Corp (MPC.N), Valero Energy Corp (VLO.N), India’s Reliance Industries Ltd (RELI.NS), PBF Energy Inc (PBF.N) and HollyFrontier Corp (HFC.N). It was not immediately clear who would be bidding in the second round.

Valero and Marathon declined to comment on the bidding process. PBF, HollyFrontier and Reliance did not immediately respond to requests for comment.

Since Venezuela began the auction this summer, the price of oil has plunged from about $105 per barrel to $77 per barrel, putting huge pressure on the government’s budget, which relies a lot on revenue from oil sales.

Plans to sell Citgo have been controversial within the Venezuelan government. Top officials in the cash-strapped country appeared to support the divestment to help shore up its finances while others in the leftist coalition slammed moves to sell Citgo as a covert privatization.