Adds context on the auction, term details

By Marianna Parraga

HOUSTON, Jan 27 (Reuters) - A U.S federal judge in Delaware on Monday approved new terms to relaunch bidding in a complex auction of shares in the parent of Venezuela-owned refiner Citgo Petroleum, set to pay creditors for defaults and expropriations in the South American country.

The changes seek to encourage higher offers and grant a fair bidding process for all parties after a $7.3 billion conditional bid by an affiliate of hedge fund Elliott Investment Management last year was rejected by most of the 18 creditors participating in the auction.

Judge Leonard Stark approved a termination fee equivalent to 3% of the value of attached judgments if a court officer overseeing the process recommends a bid other than the stalking horse bid.

A stalking horse bid, which could secure a higher value for the shares, had not been used in previous rounds.

An up to $30 million reimbursement of termination expenses was also approved, another protection for companies willing to participate.

The judge clarified that leading creditors Crystallex and ConocoPhillips COP.N are allowed to make any type of bid in the rounds, including using their claims as credit bids. Parties representing Venezuela can also separately submit bids.

At least two groups of creditors last year told the court they could present offers in a new round.

In December, Stark ordered the reopening of a data room by Citgo to provide information to potential bidders.

A final schedule for the auction must yet be issued by the court, but the final sale hearing is expected for the second half this year.

(Reporting by Marianna Parraga; Editing by Stephen Coates)

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