Friday, October 10, 2014

Venezuela/US: Update--Caracas Settles with ExxonMobil for $907 Million in 2012 Dispute

According to The Latin American TribuneForeign Minister Rafaél Ramírez said on Friday (October 10) that Venezuela is ready to bring an end to its dispute with ExxonMobil and pay additional compensation to the US oil supermajor for assets seized seven years ago.

“We’re now communicating with ExxonMobil...we won’t have a problem paying this award and closing this chapter that had become a threat to our country’s economy,” Ramírez, the chief of state oil giant PDVSA for more than a decade until he was replaced last month, said at a press conference.

“In concrete and exact terms,” Venezuela must pay somewhat less than $1 billion, “or less than 5%” of what the Irving, TX-based company had initially sought, Ramírez said.

Although ExxonMobil was awarded $1.6 billion Thursday (October 9) in the judgment by the International Center for the Settlement of Investment Disputes, a member of the World Bank Group that is headquartered in Washington, Ramírez said the $907 million that Venezuela paid in 2012 under a previous settlement must be subtracted from that total.

COMMENT: ExxonMobil had initially sought more than $14 billion for the seizure of the Cerro Negro (renamed Carabobo) heavy-crude project in the vast Orinoco oil belt and other assets.

In 2007, then-President Hugo Chávez’s government forced foreign oil companies to convert their existing operating agreements into contracts that made them minority partners in joint ventures with PDVSA in Orinoco.

While ExxonMobil and ConocoPhillips refused to accept the new terms and left Venezuela, other oil majors including France’s Total, Norway’s Statoil, Britain’s BP and San Ramon, CA-based Chevron remained on as minority partners and received compensation.

Venezuela withdrew from the ICSID in 2012 and said then that it would not recognize that arbitration institution’s rulings. 

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