ConocoPhillips Gets Trinidad Recognition for Venezuela Debt, Threatens Natural Gas Proceeds

Caracas, June 4, 2024 (venezuelanalysis.com) – ConocoPhillips has secured a favorable Trinidad and Tobago court ruling to collect a US $1.3 billion arbitration award against Venezuela.

Reuters reported that the decision issued on Wednesday, May 29, could jeopardize natural gas deals between Caracas and Port of Spain. The US oil giant is now allegedly eligible to seize proceeds owed to Venezuela from joint projects.

Trinidad High Court Judge Frank Seepersad told Reuters that ConocoPhillips can enforce the judgment if it manages to establish that there are “assets held by the defendant or money owed to the defendant by Trinidadian entities,” with the defendant being Venezuela’s state oil company PDVSA.

The judicial verdict followed reports of a prospective joint venture featuring PDVSA, Trinidad and Tobago’s National Gas Company (NGC) and BP to exploit offshore natural gas reserves in the Cocuina-Manakin fields shared between the two neighboring countries’ territorial waters.

BP and NGC received a two-year license from the US Treasury Department to negotiate with their Venezuelan counterpart. While the firms are not under Washington’s jurisdiction, most actors request the US’ green light out of fear of being targeted with secondary sanctions.

The Cocuina-Manakin fields contain an estimated 1 trillion cubic feet (tcf) of natural gas.

Caracas has recently prioritized natural gas cooperation with its island neighbor, a major hub for liquefied natural gas (LNG) exports to Caribbean and European destinations, in a bid to secure income sources amidst wide-reaching US sanctions. Unlike in joint oil ventures, Venezuelan law does not require that PDVSA hold a majority stake in gas projects, thus offering better conditions for foreign partners.

PDVSA and NGC struck a deal in December to produce and export gas from the 4.2 tcf Dragon field located in Venezuelan waters. The 30-year project is to be operated by Shell, which will hold a 70 percent stake, with NGC holding the remaining 30. Venezuela will own no shares and only receive taxes and royalties.

In the wake of the court ruling favoring ConocoPhillips, Trinidadian authorities sought to dismiss fears that the natural gas projects were in jeopardy.

Energy Minister Stuart Young said the Port of Spain government had not been notified of the judicial decision and that its legal team would evaluate the validity of the recognition of ConocoPhillips’ claims.

Young told press that the Dragon project was “not affected” by the tribunal verdict and warned against “misinformation” coming from the country’s political opposition.

In 2018, the International Chamber of Commerce (ICC) awarded the Houston-headquartered corporation $2 billion in compensation for the 2007 nationalization of oil assets by the former Hugo Chávez government.

PDVSA and ConocoPhillips reached a settlement to fulfill the award in installments. However, US economic sanctions made it impossible for Venezuelan entities to access financial markets and maintain payments. ConocoPhillips moved to collect the outstanding $1.3 billion through judicial means.

The oil corporation has likewise sought to recoup the owed amount via PDVSA’s US-based subsidiary CITGO. The company is currently undergoing a court-mandated auction of its shares to satisfy a string of creditor demands. ConocoPhillips’ ICC grant is near the top of a list that will see companies paid on a “first come, first serve” basis.

It is presently unclear if the CITGO sale, where Delaware Judge Leonard Stark is scheduled to approve a winning bid in July, would nullify the Trinidad seizure efforts.

The $1.3 billion award drew controversy in late 2021 after Delaware District Court-appointed “Special Master” Robert Pincus, who has been charged with conducting the auction process, claimed that the US-backed “interim government” led by Juan Guaidó had reached an under-the-table deal with ConocoPhillips to pay the outstanding amount. The assertion was later struck from court documents with no explanation.

ConocoPhillips separately won an $8.5 billion award from the World Bank’s ICSID court over the same nationalizations. The amount has since surpassed $10 billion with accrued interest.

The energy enterprise was also able to tag its massive claim to the ongoing CITGO auction. It first benefitted from a default ruling to enforce the award after “interim government” lawyers did not appear in court. 

In 2023, Judge Stark upheld the so-called “alter ego” ruling, making PDVSA and CITGO liable for Venezuelan state debts, and allowed ConocoPhillips to attach its demand to the sale process.