Venezuela close to losing more overseas assets

  • Market: Crude oil, Oil products
  • 10/06/21

Some of Venezuela's antagonists could be positioning themselves to benefit from new commercial opportunities in the country, writes Patricia Garip

A Dutch court has dealt a fresh blow to Venezuela's overseas portfolio, as the government and opposition prove unable to defend it from creditors and claimants.

Curacao's state-owned RdK won the right to sell shares in state-owned PdV's Netherlands subsidiary Propernyn to cover $52mn in unpaid debt in a 14 September Dutch appeals court ruling. But the real winner in the case is ConocoPhillips, which already has an attachment to Propernyn shares to cover $10bn of an arbitration award that it is owed. A Dutch court bailiff will now value and sell the asset, with a pro-rata payout to the two claimants, a process that is expected to take several months at least.

At the same time, PdV and the plaintiffs are engaged in an arbitration proceeding that could lead to a settlement before a sale is executed, Argus has learned.

For Caracas, losing Propernyn would bear a political cost, and take away a platform to recover international commercial ties in the future. But the challenge for the plaintiffs is the asset's real value. The company owns 15pc of European niche refiner Nynas and the 10mn bl Bopec terminal in Bonaire, both originally designed to handle Venezuelan crude. Nynas underwent a restructuring last year to reduce PdV's shareholding from 50.1pc to 15pc, freeing the company from US sanctions on companies controlled by PdV. The Bopec terminal is out of service and already in liquidation, with substantial environmental liabilities.

Like Curacao and Aruba, Bonaire was once a key part of PdV's Dutch Caribbean logistical network. In recent years, US sanctions, aggressive attachments by ConocoPhillips and other claimants, and PdV's lack of investment and falling oil supply effectively stripped the company of its Dutch Caribbean commercial ties.

For RdK, the Dutch court victory distracts from tensions at home, where its efforts to restart the 335,000 b/d Isla refinery once operated by PdV have fallen flat, sparking job losses. But it is not clear how much money RdK would actually win from the Propernyn share sale.

For ConocoPhillips, the short-term payout appears less important than longer-term commercial opportunities in Venezuela. The firm declined to comment on the specific case, saying: "On behalf of the company's shareholders, we remain committed to pursuing all available legal avenues to obtain a full and fair recovery of our awards."

Fighting for crumbs

Propernyn's Nynas and Bopec subsidiaries are the last substantial international assets still controlled by Venezuelan president Nicolas Maduro's government. In the context of current political negotiations with opposition parties, Maduro is demanding the restoration of control over all of Venezuela's international assets, including $2bn in central bank gold held at the Bank of England. A decision over control of the gold is pending in the UK Supreme Court.

Venezuela's main overseas asset is PdV's US refining subsidiary Citgo and Colombia-based fertiliser company Monomeros. Both have been controlled by the US-backed political opposition since 2019, when Washington and other countries recognised an interim government led by Juan Guaido.

Citgo's Delaware-based parent Citgo Holding is the target of arbitration claimants including ConocoPhillips. Unpaid PdV 2020 bondholders have an explicit pledge on shares in Citgo Holding's parent PdV Holding. In Colombia, a regulatory intervention and bankruptcy of Monomeros have sparked a battle among Venezuelan opposition parties eager to avoid blame for mismanagement and corruption there.

Venezuela has an estimated $160bn in outstanding debt, including bonds, arbitration awards and other liabilities.

Curacao: Isla refinery

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