Venezuelan Oil Co. to Challenge Asset Freeze in Holland

Caracas, April 22, 2008, (venezuelanalysis.com) – Venezuela expects to appear in court in the Netherlands before the end of the month in order to challenge an asset freeze obtained by the world’s largest oil company, ExxonMobil Corp against state oil company Petroleos de Venezuela, S.A. (PDVSA), the South American country’s Energy Minister, Rafael Ramirez confirmed on Monday.

In February Exxon won court orders in the UK; the Dutch Antilles, the Netherlands; and the U.S., freezing a total of $12 billion in PDVSA assets worldwide, pending arbitration over the nationalization, last year, of Exxon's stake in the Cerro Negro project in Venezuela’s Orinoco Oil Belt, one of the richest oil deposits in the world.

A New York court upheld the U.S. injunction of $300 million on PDVSA assets; however in a major setback for the US oil giant, British Judge Paul Walker revoked the $12 billion UK injunction on March 18.

Speaking at the 11th International Energy Forum in Rome, Ramirez said that after last month’s verdict in London, it is now Exxon which “has to pay,” for the Venezuela oil company’s legal costs.

PDVSA is also studying additional “costs associated with the damage that they have done to us,” and is considering filing for compensation the Venezuelan official declared.
As part of its case to overturn the remaining injunctions, PDVSA will tell the court that Exxon is abusing the Bilateral Agreement on Promotion and Protection of Investments between the Netherlands and Venezuela, Ramirez said.

“Many companies register in Venezuela as Dutch companies and they are not…in order to take advantage” of provisions within the treaty he explained, “Exxon now appears to be Dutch also and that is obviously an abuse and will be denounced.”

Companies including China National Petroleum Corp. and Eni SpA, Italy's biggest oil company, also conduct their operations in Venezuela through Dutch subsidiaries, he said.
Venezuela is considering withdrawing from the treaty, which is up for renewal in August, due to the “abuses that important oil companies have committed in its name,” Ramirez added.

In July last year, the Venezuelan government made a series of adjustments to all strategic association contracts in the Orinoco Oil Belt, guaranteeing a minimum of 60% state ownership, in line with the 2001 Hydrocarbons Law, which strengthens Venezuela's sovereignty over its natural resources.

Major firms pumping oil in the Orinoco, including U.S.-based Chevron Corp., France's Total, and Norway's Statoil, agreed to the new terms. However, Exxon and ConocoPhillips declined.

Conoco has since reached an “amicable” agreement with Venezuela on compensation, but Exxon filed for arbitration in the World Bank investments tribunal in September last year

In seeking the subsequent asset freeze against PDVSA, the Texas-based company claimed that the injunctions were necessary to ensure payment if it wins arbitration. However, Exxon has offered no explanation for why it sought to freeze $12 billion in PDVSA assets when it is demanding no more than $5 billion compensation.

Venezuelan President Hugo Chavez has charged that Exxon’s motivations are political and are part of a U.S. government backed “economic war” and destabilization campaign against his government and the people of Venezuela in order to roll back the Bolivarian revolution – as the radical process of social change unfolding in Venezuela is known.

The Venezuela Energy Minister also slammed the US and European policy of encouraging the development of biofuels today as “criminal” as the world faces major food shortages.

The U.S. and Europe have been promoting the development of fuels made from crops such as corn and soybeans to limit their dependence on oil imports as prices reach record highs.

According to United Nations' Food and Agriculture Organization, global food stocks are at their lowest since the 1980s and the World Bank predicted growing unrest in up to 33 countries after riots erupted in Haiti, Egypt, and the Philippines last week over soaring food prices.

“Look at the effect it has, the craziness,'' Ramirez told reporters in the Italian capital where he is attending the three day International Energy Forum. “All countries, and particularly in Latin America, have problems with food stuffs. It is a terrible idea to use foodstuffs for fuel, its criminal.”

Biofuels would just make the price of food rise and their impact on the oil market would be marginal Ramirez said, “They won’t solve anything.”

The real factor driving up the price of crude, which closed at a record $117.48 in New York on Monday, is the fragile US dollar, “it derives from the financial problems of the United States,” he argued.

Due to increased extraction costs it is also “unlikely that the price of crude will fall below $90,” he added.

Despite soaring oil prices Ramirez contended it was not necessary for the Organisation of Petroleum Exporting Countries (OPEC) to increase its production quota, at least until the next meeting of OPEC ministers in September.

While Venezuela calls for “fair” remuneration for its number one export on world markets, it provides low-interest financing for hundreds of thousands of barrels of crude daily to assist poorer nations, as well as supplying cheap heating oil through welfare programs to assist indigenous and poor communities in the US.