Exxon awarded $908m in dispute over Venezuela's asset seizure

Caracas: An international arbitration panel has awarded US oil giant ExxonMobil Corp $908 million (Dh3.33 billion) in compensation for Venezuela's 2007 nationalisation of assets, less than 10 per cent of what it sought in a dispute that pitted a top global oil company against one of the world's largest oil exporters.

Venezuelan President Hugo Chavez is likely to celebrate the ruling as a vindication of his nationalist confrontation with oil companies, aimed at increasing available funding for state-led anti-poverty programmes in the Opec nation.

The socialist leader, closely allied with Cuba's communist government, has cast ExxonMobil as an icon of the global capitalism that is the pariah of his self-styled revolution. The limited payout in the claim will reduce potential liabilities at a time when Chavez is boosting state spending to shore up support in the run-up to his October re-election bid.

Contractual liability

An ExxonMobil spokesman said in an emailed message yesterday that the decision by the International Chamber of Commerce confirmed that Venezuela's state oil company, PDVSA, "does have a contractual liability to Exxon Mobil". "The ICC award is for $907,588,000."

ExxonMobil filed an arbitration claim in 2007 seeking as much as $10 billion in compensation for the Cerro Negro project located in the Orinoco heavy oil belt that Chavez nationalised along with three other projects in the same area.

Two Venezuelan government sources told Reuters on Saturday that an arbitration panel had reached a decision in the case and that it was favourable to Venezuela. They declined to give the amount Venezuela was ordered to pay.

Venezuela still faces more than a dozen outstanding arbitration claims, including disputes with US oil firm ConocoPhillips and Swiss cement-maker Holcim, which in some instances could force Venezuela to make payouts in the billions of dollars.

ConocoPhillips was an investor in two of the four Orinoco projects, which turned tar-like oil into valuable light crude. The two companies had in total asked for as much as $40 billion in compensation.

Venezuelan Energy Minister Rafael Ramirez has said the country does not expect to pay more than $2.5 billion for the combined total of the Conoco-Phillips and ExxonMobil arbitration claims.

ExxonMobil said in 2007 it had invested about $750 million in the Cerro Negro heavy crude project, which was renamed PetroMonagas as part of the state takeover.

Overturned

In 2008, ExxonMobil won an injunction against PDVSA to freeze up to $12 billion in company assets, a ruling that was quickly overturned but sparked furious criticism by the Chavez government and further deteriorated relations between the two.

Oil companies have remained eager to invest in the Orinoco belt, which is considered to hold one of the world's largest reserves of crude, with US oil major Chevron and Spain's Repsol signing investment deals in 2010 for new multibillion-dollar projects there.

Chavez's steady push to boost control over the country's oil industry starting in 2004 was followed by similar efforts in oil-producing countries ranging from Ecuador to Kazakhstan. Critics say his efforts have slowed investments that could help lift Venezuela's crude production.