ConocoPhillips Moves to Seize Venezuelan Oil Assets as PDVSA Maneuvers to Safeguard Tankers

In response to the threat, PDVSA has allegedly ordered its fleet of tankers stationed in the Caribbean to return to Venezuelan waters.

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The logo of the Venezuelan oil company PDVSA is seen on a tank at Isla refinery in Willemstad on the island of Curacao
The logo of the Venezuelan oil company PDVSA is seen on a tank at Isla refinery in Willemstad on the island of Curacao, April 22, 2018. (Andres Martinez Casares / Reuters)
By Paul Dobson
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Merida, May 9, 2018 (venezuelanalysis.com) – US oil multinational ConocoPhillips is attempting to seize Venezuelan oil assets in the Caribbean as part of an ongoing dispute with the country’s state-run oil company, PDVSA, Reuters reports.

In response to such threats against the company’s infrastructure, an unnamed shipyard worker told the news agency that PDVSA has ordered its fleet of tankers stationed close to the Dutch islands of Curacao, Bonaire, and Aruba – a short distance off the Venezuelan coast – to return to national waters as soon as possible.

Moreover, it is alleged that PDVSA rerouted the Aframax tanker British Cygnet from Curacao to a Venezuelan port to avoid its contents being seized by the Houston-based firm.

The British Cygnet tanker arrived Sunday at the Bullenbay terminal in Curacao from the Russian port of Primorsk bearing light crude which will be mixed with the super-heavy crude from Venezuela’s Orinoco Belt oilfield. Before unloading, it was ordered to re-route to the Jose port in Venezuela.

An unnamed PDVSA source interviewed by Reuters claimed that this is the ninth ship this year to have been rerouted from Curacao’s La Isla refinery to one of Venezuela’s numerous refineries.

Despite the legal maneauvering by ConocoPhillips, no confirmed seizures of PDVSA’s property in the Caribbean have been reported to date.

The dispute between PDVSA and ConocoPhillips concerns the 2007 expropriation of the firm’s Venezuelan assets by the then President Hugo Chavez.

Last month, ConocoPhillips was awarded USD $2.04 billion in compensation by the International Chamber of Commerce (ICC), a mere fraction of the USD $22 billion the multinational asked for. Following the ICC announcement, the Venezuelan government claimed victory in the case, pointing to the reduced amount of compensation cash-strapped PDVSA was ordered to pay.

However, ConocoPhillips has been concerned about the mechanics of extracting this payment from PDVSA, given the current economic crisis in Venezuela and its falling oil production.

Recent attempts by oil giant Exxon-Mobil to seize PDVSA assets as part of the USD $908 million compensation for the expropriation of its assets in 2006-07 have been unsuccessful so far. Likewise, efforts by Canadian mining multinational Crystallex to extract compensation for the 2008 expropriation of its assets has recently been ruled unlawful, on the grounds that the claim was directed at the Venezuelan people and not at state-run oil firm PDVSA.

Nevertheless, ConocoPhillips has recently filed successful legal claims in two Caribbean courts to seize PDVSA’s assets in the Dutch Antilles of Curacao, Bonaire, Aruba and Saint Eustatius.

A ConocoPhillips statement explains that they "will pursue all available legal avenues to obtain full and fair compensation for our expropriated investments in Venezuela.”

Apart from the Caribbean assets, ConocoPhillips has its sights on PDVSA’s US-based refinery, CITGO, as a possible asset which could be partially seized to finance the compensation.

PDVSA also owns a storage unit in the Dutch island of Bonaire which can hold 800,000 barrels of oil. The state firm uses the deep sea ports of the Dutch Antilles islands to store oil before it is sent to its major partners in China, India, and the USA.

In Curacao, PDVSA rents La Isla refinery from Curacao’s state-run oil firm, meaning that it cannot be seized by ConocoPhillips. La Isla refines 335,000 barrels a day. Yet, PDVSA-owned tankers entering the refinery and the oil they carry can be seized should local authorities consent.

Following the alleged rerouting of PDVSA’s refining and storage activities away from the Dutch islands, Curacao’s prime minister, Eugene Rhuggenaath, expressed concerns about the knock-on impact on local economies, with La Isla refinery accounting for 10% of Curacao’s GDP and providing significant employment.

“We are aware of the potential risks for the operation of the refinery,” he stated. “A stoppage of the operation would have a devastating impact economically and socially.”

Rhuggenaath has also said that ConocoPhillips has yet to seize any assets on the island, indicating that his government is still scrutinizing a lien – a legal instrument that paves the way for an asset seizure – Reuters reports.

Similarly, Bonaire’s governor, Curvin George, explained Sunday that his council has agreed to a partial release of the oil stored at PDVSA’s facility with the crude to be used at a local power station as part of a deal struck between PDVSA’s Bonaire Corporation and ConocoPhillips, Dutch officials affirmed.

"Through a joint effort, we could avoid a power-down on the island," said Karim Mostafi, a spokesman for the Dutch Infrastructure Ministry. The release will provide one to two weeks worth of supply for the island's electric utility.