Updates June 16 story with auction details in paragraphs 1, 3-5, 11 and 14-15

By Marianna Parraga

HOUSTON, July 1 (Reuters) - A U.S. court has completed a second bidding round in a auction of shares in the parent of Venezuela-owned Citgo Petroleum after at least three consortia submitted revised bids in June, raising creditors' hopes of receiving payment for some of Venezuela's outstanding debt.

The court-organized auction for the seventh-largest U.S. refiner stems from an eight-year-old case that Canadian miner Crystallex initiated in Delaware against Venezuela. The federal court found Citgo's parent, PDV Holding, liable for Venezuela's debts and past expropriations, paving the way for over a dozen other creditors to pursue compensation of nearly $19 billion.

The second bidding round was completed this year after a string of delays. A $3.7 billion offer by Contrarian Funds' affiliate Red Tree Investments, which included a separate $2 billion agreement to pay holders of a defaulted Venezuela bond, was selected in March as the starting bid. Rivals placed their bids last month.

Companies that submitted rival bids included a group led by a subsidiary of miner Gold Reserve GRZ.V and a consortium led by private equity firm Black Lion Capital Advisors, according to court filings.

Elliott Investment Management's affiliate Amber Energy and trading house Vitol also considered bids, but it remains unclear if they submitted revised offers during the "topping" period.

That period ran from April 28 through June 18.

A court officer overseeing the auction, who last month said new bidders could emerge right before the deadline to submit offers, must make a recommendation on the auction's winner by July 2. The judge and parties in the case are expected to attend a final hearing about the sale process on August 18.

How big a loss could this be for Venezuela?

If Venezuela, which owns 100% of the refiner and its U.S.-based parent companies, fails to retain some equity, it would lose its most significant overseas asset. The country, with foreign debt reaching $150 billion, has already lost other assets in Europe and Asia to creditors.

Delaware Judge Leonard Stark has left open a possibility for parties representing Venezuela to submit an offer. But boards supervising the refiner would need to secure backing from politicians in both Caracas and Washington, a challenge given U.S. sanctions on the OPEC nation and otherwise strained ties.

Prior to the sanctions, Citgo's 807,000-barrel-per-day refining network was a primary processor of Venezuela's heavy sour crudes. Since Citgo cut ties with its ultimate parent, Caracas-based state-run oil company PDVSA, in 2019, Venezuela has struggled to find new markets for its oil, while the Houston-based refiner has resorted to other crude suppliers.

Venezuela's opposition, which through its Congress majority in 2019 appointed the boards that now supervise the refiner, has worked for years to retain Citgo, including funding legal defenses and lobbying in Washington. The U.S. Treasury Department, which has shielded Citgo from creditors in recent years, must approve the auction's eventual winner.

Opponents of Venezuelan President Nicolas Maduro have said Citgo could aid the nation's economic recovery if democracy is restored. Maduro's officials have rejected U.S. sanctions and called the auction the robbery of a sovereign asset.

Can creditors claim post-auction compensation?

Yes. Many creditors including ConocoPhillips COP.N, which holds the largest claims of almost $12 billion, and Gold Reserve, have pursued legal action outside of the U.S. to seize Venezuela-owned assets, such as bank accounts, tankers and PDVSA-controlled storage facilities.

The creditors, who rejected the outcome of a bidding round last year due to conditions imposed by the winner, Elliott's affiliate Amber Energy, can submit objections if dissatisfied with its results.

They can also continue parallel cases in other U.S. courts, which so far have not significantly progressed to enforce bond-related claims or prove that PDVSA's U.S. subsidiaries should be liable for Venezuela's debts, a necessary step to pursue Citgo's assets.

Accumulating legal costs and uncertain recovery prospects led three of the 18 creditors originally cleared by the court to withdraw. Others, including an owner of artifacts that belonged to Venezuelan independence hero Simon Bolivar, did not fulfill all court requirements to participate.

Will all creditors be compensated?

Unlikely. While Citgo was valued between $11 billion and $13 billion as part of the Delaware case, expectations are that the auction will yield around $8 billion, factoring in potential side agreements with key creditors, like bondholders.

Citgo's recent weak performance, including a profit that plummeted to $305 million last year from $2 billion in 2023, could also affect its valuation.

These factors suggest that more than half of the 15 registered creditors, collectively claiming $18.9 billion, may not receive distributions from the auction.

(Reporting by Marianna Parraga; Editing by Christian Plumb and Marguerita Choy)

((marianna.parraga@thomsonreuters.com; +1 713 371 7559; Reuters Messaging: @mariannaparraga))