HOUSTON, May 27 (Reuters) - A U.S. federal judge has

extended to at least June 2 a period for bidders to submit rival

bids in a court-organized auction of shares in the parent of

Venezuela-owned refiner Citgo Petroleum, according to a filing

released on Tuesday.

Last month, Delaware judge Leonard Stark approved a $3.7

billion offer from Contrarian Funds' affiliate Red Tree

Investments as the starting bid in the auction of shares, aimed

at compensating 15 creditors for debt defaults and

expropriations in the South American country.

Red Tree and rival consortia had been given until May 28 to

submit competing or improved offers, but lawyers representing

Venezuela last week requested more time for parties to analyze

parallel lawsuits in other U.S. courts that could affect the

amount or conditions of some bids.

According to a new calendar proposed by some creditors and

supported by a court-appointed "special master" overseeing the

sales process, the topping period could be extended for as much

as three weeks, but the auction's final hearing would still be

done in July after a winner is selected. Judge Stark must rule

on the proposed calendar.

Since last year, some Venezuela-linked creditors trying to

cash proceeds in the eight-year case in Delaware have introduced

lawsuits in pursuit of the same assets. A New York court last

week dismissed arguments by one of the groups of creditors.

The new legal developments are encouraging fresh offers,

special master Robert Pincus said on Tuesday in a motion

supporting the extension, without elaborating on the potential

bidders' names.

"The special master believes that the requested 21-day

extension of the topping period may lead to a more robust

bidding process through the submission of new and improved

topping bids," a counsel for Pincus said in a filing.

The lawyers representing Venezuela requested the

extension, writing: "This is a monumental development in the

sale process. The Venezuela parties respectfully move for an

extension of (the) topping period to allow bidders, or potential

bidders, to account for the elimination of what the special

master has called a 'cloud of uncertainty,' that has hung over

the bidding."