February 08, 2008
Exxon Mobil has won a British court order freezing up to $12 billion of worldwide assets belonging to the Venezuelan national oil company, Petroleos de Venezuela, in a dispute over President Hugo Ch¿vez's efforts to seize control of oil ventures in his country.
Exxon Mobil said yesterday that it also obtained court orders freezing assets in the Netherlands and the Netherlands Antilles, as well as a U.S. court order in the Southern District of New York attaching $300 million in funds belonging to Cerro Negro, a joint venture of Exxon and the state oil company, commonly known as PDVSA.
The court orders give Exxon an early victory in what could become a long arbitration fight. Exxon is seeking billions in compensation after it failed to reach an agreement with the Venezuelan government last year over ceding control of its joint ventures to PDVSA.
"We'd like to get back to the table if we can get things under discussion with the Venezuelans, . . . but basically we are proceeding on the arbitration track at this point," Exxon's vice president for investor relations, Henry Hubble, said in a conference call with oil analysts last week.
Venezuelan government bonds slid yesterday as investors weighed the impact that the freezes might have. Yields on the bonds climbed 42 basis points, to 9.53 percent. Oil exports are the country's main source of revenue, and it remained unclear whether the court orders would affect those payments.
In May, the national oil company seized majority stakes in four projects containing some of the largest heavy oil deposits in the world. The move was part of a wider effort by Ch¿vez to boost state control over such parts of the economy as utilities, television and telecommunications.
It also reflected a trend in some resource-rich countries, such as Bolivia, Russia and Kazakhstan, toward renegotiating contracts with foreign oil companies now that oil prices are high.
Foreign companies have responded in different ways. ConocoPhillips pulled out of its Venezuelan oil ventures in June and took a $4.5 billion write-off after failing to agree on new contract terms with Ch¿vez's government. However, four other major oil companies -- Chevron, Statoil, Total and BP -- signed deals giving the Venezuelan state oil company 60 to 83 percent interest in their ventures.
"Exxon has been the most aggressive in fighting the Venezuelan government," said Michael Shifter, a senior analyst at the Inter-American Dialogue. "It's a tug-of-war that is going to accompany this wave of resource nationalism we're seeing in Latin America and other parts of the world. People are going to be watching this decision by the court to see what the parameters are and how far governments can push the companies."
Exxon's dispute revolves around two joint ventures: the Cerro Negro project and the La Ceiba project. In September, Exxon affiliates filed an arbitration claim with the International Centre for Settlement of Investment Disputes against the Venezuelan government seeking the fair market value of the expropriated investments.
On Jan. 25, Exxon's affiliate, Mobil Cerro Negro, filed an arbitration request at the International Chamber of Commerce against PDVSA and the Cerro Negro joint venture to recover damages for breach of agreements.
In each arbitration case, the company is seeking damages "in multiple billions of dollars," according to an e-mail from Margaret Ross, an Exxon spokesman.