By Marianna Parraga and Gary McWilliams

HOUSTON (Reuters) – A U.S. court auction weighing the fate of Venezuela-owned oil refiner Citgo Petroleum has received bids using claims in lieu of cash, according to people familiar with the process and documents, part of a historic case to settle Venezuelan debts.

Oil producer ConocoPhillips (NYSE:), the largest creditor in the case after presenting the court with some $12 billion from asset expropriations in Venezuela, last month submitted a credit bid using its claims, the people said. A spokesperson declined to comment.

Other bidders also have tried to apply their claims against Venezuela in bids, a Delaware court officer overseeing the auction has said, which could leave less cash to be distributed among the remaining creditors. The court has not disclosed details from a bidding round that received offers until Jan. 22.

Credit bids raise the prospect of insufficient cash to settle a total of $21 billion in claims accepted by the court, inflaming some creditors sensing they could be left out of a payout.

The claims stem from Venezuela’s expropriations and debt defaults since it nationalized energy and mining companies more than a decade ago. Citgo became enmeshed in the case when the court in an extraordinary ruling found its parent PDV Holding liable for the South American nation’s debts.

Conoco exited oil refining 12 years ago when it spun off Phillips 66 (NYSE:). It was unclear whether the credit bid was placed with another company or intended to secure Citgo assets that could be broken off.

In addition to Conoco, energy companies Chevron (NYSE:), Reliance Industries, Koch Industries and Valero Energy (NYSE:), and at least one activist investor have expressed interest in the sales process, the people said. Dozens of bidders began due diligence, seeking information for the non-binding first round, the people said.

Conoco, Koch Industries and a board supervising Citgo declined to comment. Chevron, Reliance and Valero did not reply to requests for comment.

WHAT’S CITGO WORTH?

Credit bids raise new complications in an already drawn-out court case that broke new legal ground in disputes against foreign countries. Another factor is the uncertainty of Citgo’s fair value, four investment bankers close to the auction said.

The oil refiner has been highly profitable, but people close to the bidding said the parent’s shares could ultimately fetch about half of a market value close to $12 billion due to risks of future lawsuits from creditors or Venezuela, other refineries on the market, and the need for U.S. approvals.

Citgo’s earnings before interest, taxes, depreciation and amortization, or EBIDTA, could fall to about $2.5 billion this year based on expected margins, affecting valuations, two of the sources said.

The Houston-based company operates an 807,000-barrel-per-day oil refining network spread from Illinois to Texas, owns interests in pipelines and terminals, and supplies fuel to 4,200 independent gasoline outlets in the U.S.

Investment banker Evercore Group is overseeing the auction’s marketing and data collection, which has drawn early interest from dozens of companies and individuals in the first phase.

A second bidding round was tentatively scheduled for May. Evercore did not reply to a request for comment.

For the court to side with a credit bid, it would likely require the auction winner to use its control of Citgo to pay other creditors over time, one person close to the matter said.

“The restructuring will have to be in the hands of Conoco if it wins with a credit bid,” the person added.

CREDIT AND CASH

Conoco has three claims in the top 15 of a list of creditors that U.S. Judge Leonard Stark has used to establish a “first-in-time” priority order. Conoco has said it aims to cash about $10 billion from the three awards after deducting what it received previously.

Stark has ruled that credit bids must include “a cash component or other funding mechanism” to pay liens against the Citgo parent’s shares.

Three Venezuela creditors and the court officer overseeing the process, Robert Pincus, last week said in separate filings that the use of multibillion-dollar claims as part of bids threatens the court’s schedule.

Pincus said accepting proposals by some creditors to change their status could complicate his efforts to evaluate the credit bids against others.

The creditors list also includes miner Crystallex, which first introduced the case in Delaware, groups of bondholders and companies such as O-I Glass (NYSE:) and Siemens Energy. More creditors are trying to join the case.

“Will the court have the courage to accepts a bid that only pays off a handful of creditors? That’s the issue,” one of the sources said.