CARACAS - A Delaware Uniform Commercial Code (UCC) filing against Citgo parent PDV Holding, Inc. on November 30 reveals that Venezuela has secretly mortgaged their Citgo refineries in the United States to Russia's state-controlled oil company Rosneft.CITGO - A Strategic Asset?
PDV Holding Inc., owned by Venezuela state oil company Petroleos de Venezuela, S.A. (PDVSA), owns Citgo Holding Inc., which in turn, owns Citgo Petroleum Corporation, which has 3 refineries and pipelines throughout the United States.
The lien means that should Citgo or PDVSA default, Russia's state controlled oil company Rosneft could end up owning strategically important oil refineries and pipelines in the United States.
Citgo owns oil and gas pipelines throughout the country as well as oil refineries in Corpus Christi, Texas; Lake Charles, Louisiana; and Lemont, Illinois (outside of Chicago). Citgo's refineries can refine 749,000 barrels per day and the Lake Charles refinery is the sixth-largest refining facility in the U.S. UCC FILING
The Uniform Commercial Code (UCC) filing is used to protect creditors and let other potential creditors know that they have an interest in the asset.
According to the copy obtained by the Latin American Herald Tribune
, the UCC "Financing Statement" was filed by "secured creditor" "Rosneft Trading S.A., Place du Lac, 2, Geneva, Switzerland" on November 30 against 49.9% of the shares of Citgo Holding Inc.
An investigation by LAHT suggests that cash-strapped PDVSA mortgaged 49.9% of Citgo to Rosneft for a $1.5 billion loan. CITGO MORTGAGES 50.1%
In October, in addition to a 20% bonus, PDVSA used 50.1% of Citgo Holding Inc. as collateral to induce $2.8 billion of holders of PDVSA debt maturing within the year to extend into a new 4 year amortizing bond. As a result, should PDVSA default, the holders of the new $3.4 billion PDVSA 8.5% of 2020 would be able to take 50.1% of Citgo Holding Inc.
The Rosneft filing means that 100% of Citgo Holding is now encumbered and potentially at risk.
Russ Dallen of the Venezuela Opportunity Fund
, who helped investigate the secret investment, points out that on November 30, Venezuela's reserves went up $891 million and that analysts have been unable to account for where the money came from, leading to the possibility that it could have been the remainder of the loan from Rosneft. PDVSA was late paying the almost $3 billion in bond debt that it owed in November, with the last $146 million that was due on November 17 being paid to bondholders two weeks late on November 30 and December 1.
Dallen also noted that PDVSA hinted and foreshadowed during a conference call with potential investors that he participated in for the new collateralized PDVSA 2020 in October that Venezuela was free to utilize the other 49.9% of Citgo Holding in response to a question.
Eulogio del Pino, PDVSA head and Venezuela Oil Minister, along with Venezuelan Foreign Minister Delcy Rodríguez met on November 20 with the head of Russia’s Rosneft Igor Sechin to "strengthen the cooperation agenda between the two oil companies."
“We continue consolidating strategic alliances between Pdvsa and Rosneft. Important meetings will be held in the next hours,” Del Pino posted on his Twitter account.
Del Pino also met with Rosneft Vice-President Eric Maurice Liron to track joint projects, according to Venezuela's state-run news agency AVN.
Rosneft is a minority shareholder in five joint crude oil-producing companies in Venezuela: Petro Miranda, Petro Victoria, Petro Perijá, Petro Monagas and Boquerón.RUSSIA'S EXPANDING ENERGY FOOTHOLD
In 2010, Venezuela President Hugo Chavez sold PDVSA's stakes in 4 Ruhr oil refineries in Germany to Rosneft for $1.6 billion, giving Rosneft a key foothold in the European market.
Founded in 1992, Rosenft became the world's biggest oil and gas producer by volume (5.2 million barrels per day) through acquiring others. In 2004, Rosneft took over competitor Yukos after Vladimir Putin jailed Yukos head Mikhail Khodorkovsky and in 2013 Rosneft took over TNK.
In 2014, Rosneft took over Bashneft after its owner, too, was arrested.
BP owns 19.75% and a consortium of mining and trading firm Glencore and the Qatar Investment Authority just paid Russia $11.3 billion for 19.5% of Rosneft. Another 10.75% floats on the Russian stock exchange.
The Russian government owns the remaining 50% of Rosneft, and Rosneft head Igor Sechin is a long-time ally of Russian President Vladimir Putin.
In October, Rosneft acquired Indian refiner Essar Oil in a $13 billion deal. The transaction included India's second-largest refinery at Vadinar (400,000 bpd), as well as port terminals, power plants and pumps.
Earlier this month, Rosneft acquired 30% of the Shourouk concession in Egypt and its supergiant offshore Zohr gas field from Italy's Eni SPA for $1.575 billion.
In spite of European and U.S. sanctions on Rosneft and its head Sechin over the annexation of Crimea, Dallen points out that Rosneft has made billions of dollars in overseas acquisitions this year in addition to raising billions from an equity sale to Glencore and Qatar.
"Even as sanctions against them continue to be renewed, it is clear that the Russians are using Rosneft to further Putin's geopolitical ambitions," says Dallen. "But will the U.S. government stand for a country with which we have an increasingly adversarial relationship owning strategic energy assets in
the United States? It could be an early test for a Trump administration that has seemingly conflicting viewpoints and relationships with Russia."
Dallen pointed out that this deal was signed after
Trump was elected. CITGO SUED FOR FRAUDULENT TRANSFER
Citgo is already being sued in Delaware in separate suits by both ConocoPhillips and Crystallex under Delaware's Uniform Fraudulent Transfer Act, alleging that Citgo, PDVSA and Venezuela "fraudulently transferred" $2.8 billion in Citgo assets out of the U.S.A. to avoid billions of dollars of claims by creditors. The lawsuits are ongoing.REDD Intelligence
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Citgo UCC filed by Rosneft by Latin American Herald Tribune on Scribd
PDVSA Supplemental Offering Circular 26 Sept 2016 by Latin American Herald Tribune on Scribd
ConocoPhillips v Citgo PDVSA - USDC Del - Originating Complaint - 6 November 2016 by Latin American Herald Tribune on Scribd
Crystallex v PDV Holding - USDC Del - Originating Complaint - 28 October 2016 by Latin American Herald Tribune on Scribd