HOUSTON (Reuters) -An affiliate of Elliott Investment Management wants to cut costs at Venezuela-owned Citgo Petroleum while a unit of Gold Reserve ( GDRZF ) would largely focus on maintaining the status quo, five sources told Reuters, as a lengthy auction that will determine the refiner's future nears an end.

Details of the two competing visions for Citgo emerged ahead of a U.S. court selecting the winner for an auction of shares in Citgo's parent company, PDV Holding.

Fifteen creditors are lining up to cash proceeds from the auction of shares, ordered by the Delaware court as part of a complex, eight-year case to compensate them for debt defaults and expropriations in Venezuela.

A hearing next week would help the judge decide who should prevail and move the auction - which has lasted nearly two years - to the takeover phase of the seventh-largest U.S. refiner.

After three rounds and a last-minute bidding war, a court officer overseeing the auction in August recommended a $5.9 billion offer from Elliott's Amber Energy as winner, reversing his previous support for a $7.4 billion bid from Gold Reserve's ( GDRZF ) Dalinar Energy.

The main difference between the bids is Amber's pact to pay $2.1 billion to the holders of a defaulted Venezuelan bond, a key step in removing an obstacle to the takeover.

If its bid is confirmed, Amber would advance a streamlining plan while Dalinar, which is still fighting in court for a shot, wants to leverage the refiner's strengths to largely keep assets and operations the same, five sources with knowledge of the plans said.

Details of both companies' strategies have not been publicly disclosed.

Gold Reserve ( GDRZF ) declined to comment. Citgo and Amber did not reply to requests for comment.

EXTREME MAKEOVER

Amber's team would be led by refining experts Greg Goff as chief executive and Jeff Stevens as president. The Elliott affiliate seems to have more appetite for radical changes at Citgo, which could start with the removal of its board of directors and top managers, three of the sources said. 

Following its purchase of a $2.5 billion stake at Phillips 66, hedge fund Elliott this year elbowed itself into two seats at the rival refiner's board and is supporting a divestiture plan, cost cuts and operational changes to address perceived underperformance. 

"Elliott will surely find where to cut in Citgo," said a source close to the refiner, citing audits that showed inefficiencies grandfathered in from its historic status as a wholly-owned subsidiary of a formerly wealthy state company.

Goff and Stevens are expected to run the business for several years, said independent refining expert Garfield Miller. But "if it winds up as a restructuring, Elliott knows as much about restructurings as anyone," he added. 

Citgo is among the most complex U.S. refiners, with a 807,000 barrel-per-day network across Texas, Louisiana and Illinois, 42 terminals, eight pipelines and three lubricant plants. It employs 3,300 people and supplies some 4,000 independent retail outlets. 

The plans could help monetize Amber's investment, especially after it pays billions of dollars in cash to the Venezuela bondholders as planned, the sources said. 

"If Elliott's affiliate is confirmed as the auction's winner, the takeover will be as aggressive as its cost-cut plan," another source said. A hostile removal of board members would trigger protective clauses in place to indemnify them, the person added. 

Streamlining would precede any asset sales, the sources said. But the auction has already helped identify potential buyers for certain assets - including rival refiners - as well as possible trading pacts that could help Citgo source oil more economically. 

GOING WITH THE FLOW 

Gold Reserve ( GDRZF ) envisions a more collaborative approach. The Toronto-listed miner, which has knowledge of Venezuela and its state companies from previous ventures in the country, hopes to leverage Citgo's existing management, infrastructure, and financial strength to launch its U.S. subsidiary Dalinar into the refining sector, the five sources said.

Gold Reserve ( GDRZF ) has praised Citgo's leadership and recently aligned with lawyers representing Venezuela and Citgo in court to counter Amber's bid and ensure auction proceeds benefit the creditors in Delaware.

"They've done an extremely good job under the circumstances," Paul Rivett, executive vice-chair of Gold Reserve's ( GDRZF ) board, told investors in July, referring to Citgo's current management.

Tony Sementelli, who was executive vice president and chief financial officer of Koch-backed refiner Flint Hills Resources, was named as Dalinar's chairperson. At least two other board members previously worked at Flint Hills.  

Because of the complexity of its offer's financing, Dalinar's plan hinges on keeping Citgo almost intact. Rival bidders, some creditors and court officer Robert Pincus have argued the bid depends too heavily on Citgo's future performance, a motivation for preserving assets.

Whatever the court ends up deciding, the sale process could still face roadblocks delaying a takeover. The U.S. Treasury Department needs to greenlight any winner.