ConocoPhillips Awarded US$2bn for 2007 Oil Field Expropriation, Venezuela Claims Victory

Venezuela claims the award ordered by the ICC is lower than the amount originally offered by Chavez as compensation and is only 10% of what the oil giant filed for.

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ConocoPhillips previously invested heavily in Venezuela’s oilfields until President Chavez expropriated their assets in 2007
ConocoPhillips previously invested heavily in Venezuela’s oilfields until President Chavez expropriated their assets in 2007. (Archive)
By Paul Dobson
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Merida, April 26, 2018, (venezuelanalysis.com) – The International Chamber of Commerce (ICC) has ruled in favour of US oil multinational ConocoPhillips Wednesday in its dispute over a 2007 expropriation by the Venezuelan government of Hugo Chavez. Venezuela’s national oil company, PDVSA, which took over the Houston-based firm’s holdings, has been ordered to pay US$2.04 billion.

The damages awarded greatly outstrip the US$908 million the ICC ordered PDVSA to pay ConocoPhillips’ rival, ExxonMobil, in a similar case in 2012, but falls a long way short of the US$30 billion maximum compensation which ConocoPhillips had filed for.

Despite the sizeable payout, the Venezuelan government has declared victory in the case, claiming that the figure of US$2.04 billion is less than the amount offered as compensation for the oil giant’s holdings at the time. They also pointed out that the US firm will receive “less than 10% of what they had filed for.”

“The ruling represents a tough lesson for the transnational ConocoPhillips as the amount awarded is even lower than the amount which Venezuela legitimately offered more than 10 years ago,” reads a public statement from President Maduro’s government.

However, ConocoPhillips spokespersons seemed content with the ruling.

“We are happy with the decision of the court,” stated Janet Langford Carrig, corporate secretary at ConocoPhillips.

“The ruling upholds the contractual protections to which ConocoPhillips is entitled under the applicable agreements and acknowledges PDVSA’s independent contractual liability arising from the government of Venezuela’s unlawful and uncompensated expropriation of ConocoPhillips’ investments,” she went on to add.

ConocoPhillips owned majority shares in the Hamaca and Petrozuata mixed firms which were extracting extra-heavy crude in Venezuela’s Orinoco Belt oil fields. The multinational’s investments, alongside those of other foreign oil companies such as ExxonMobil, were nationalised in 2007 following the approval of the Law on Hydrocarbons. ExxonMobil and ConocoPhillips abandoned the country after negotiations over the payout for the expropriations collapsed.

Following the state takeover, ConocoPhillips filed legal proceedings against the Venezuelan government in the ICC’s arbitration tribunal, known as “the world’s business organisation”.

This week’s ruling does, however, raise the question of whether and how the Texas-based oil firm will be able to enforce the payment, especially in light of the ongoing economic downturn in the Caribbean nation as well as PDVSA’s falling levels of crude extraction.

One possibility to which ConocoPhillips has previously alluded involves the seizing of PDVSA’s foreign assets, notably the tankers, pipelines, and refineries of PDVSA’s US subsidiary, CITGO. ConocoPhillips has already brought legal action against PDVSA’s Citgo in the US city of Delaware, in which it looked to seize assets as collateral for the proceedings.

Efforts by ExxonMobil to extract USD$188 million in compensation granted by the World Bank’s International Center for the Settlement of Investment Disputes (ICSID) have also faced legal hurdles, with a Manhattan federal court blocking enforcement of the multi-million dollar award on procedural grounds last July.

ConocoPhillips is also awaiting a decision by the ICSID regarding the same 2007 takeover. Whilst having already ruled that PDVSA broke international law, the ICSID is yet to rule on the compensation claim, and there is a pending appeal against the ruling from the Venezuelan government.

Venezuela withdrew from the ICSID in 2012, but as ConocoPhillips’ claim was filed prior to Caracas’s exit, the ICSID maintains its jurisdiction to rule on the issue.