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UPDATE 1-Citgo Petroleum in talks with Aruba on refinery contract

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HOUSTON, May 28 (Reuters) - Citgo Petroleum Corp said on Tuesday it is holding talks with the government of Aruba on its oil refinery operating contract, a day after Aruba disclosed it would form a committee to decide the fate of the plant.

The U.S. subsidiary of state-owned Petroleos de Venezuela (PDVSA) said it is holding "active conversations with our counterparts in Aruba and hopeful that we will reach a solution for future work together."

Aruba's prime minister, Evelyn Wever-Croes, on Monday said the Caribbean nation expects to overhaul or terminate the contract. U.S. sanctions against Venezuela have hampered production.

An advisory committee will evaluate options including continuing to work with Citgo, terminating its contract and finding another operator, or seek another activity for the facility.

Citgo and Aruba in 2016 agreed to a 25-year contract to refurbish and reopen the 209,000-barrel-per-day refinery, which has been idled since 2012, when its former operator, U.S.-based Valero Energy Corp, abandoned it over low profits.

The $685 million overhaul, which had received initial funding from Citgo and PDVSA, had shown little progress since Washington in August 2017 issued a first round of sanctions on the Venezuelan state-run oil company. In late January, a second round of sanctions left the refinery without access to credit. (Reporting by Gary McWilliams; Editing by Sandra Maler)