Caracas mulls options to compensate ExxonMobil

Venezuela will accept an international arbitration panel's ruling that orders Caracas to pay compensation to ExxonMobil for the government´s May 2007 expropriation of its local assets, but it does not expect to pay the full $1.6bn award, the Energy Ministry said this afternoon.

Venezuelan state-owned oil company PdV, which now operates the former ExxonMobil assets, has so far not commented publicly.

The government expects to pay ExxonMobil less than $1bn after adjustments in compliance with a "double recovery" prohibition in the compensation award issued today by the International Centre for Settlement of Investment Disputes (Icsid), which is part of the World Bank.

Arbitrators with the Paris-based International Chamber of Commerce (ICC) awarded ExxonMobil $904mn in compensation in December 2011 for the nationalization of its stake in the Cerro Negro extra-heavy crude upgrader, now called PetroMonagas.

The ICC award will be subtracted from the net compensation that PdV will make under the Icsid award announced today, the ministry said.

The Icsid panel awarded $1.412bn for 120,000 b/d Cerro Negro. Venezuela´s state-owned PdV now operates the facility with an 83.3pc stake. The balance is owned by Russia´s state-controlled Rosneft.

The Icsid award also includes $179.3mn for La Ceiba, an oil field on the southeastern shore of Lake Maracaibo.

The government expects to settle accounts with ExxonMobil before the end of this year, the ministry said.

Caracas is considering several payment options, including cash, bonds or crude oil supplies. Alternatively, PdV could also sell its 50pc stake in the 184,000 b/d Chalmette refinery to ExxonMobil, which holds the other 50pc stake, Venezuelan officials said.

PdV and ExxonMobil still have to negotiate the structure, terms and conditions of how the Icsid-mandated compensation will be paid, the ministry added.

PdV earlier this year retained Deutsche Bank to find investors interested in acquiring the Venezuelan company's 50pc stake in Chalmette. PdV's stake in Chalmette is currently valued at about $900mn, the Energy Ministry said.

The company is trying to sell its foreign downstream assets, including its US subsidiary Citgo.

Foreign minister Rafael Ramirez, who as energy minister and PdV president executed the presidential decree that expropriated ExxonMobil's assets in 2007, today praised the Icsid panel's decision as a victory for Venezuela.

The award "is within the reasonable (compensation) range that the republic considered in 2007 when it made its best efforts to reach an amicable agreement that ExxonMobil abruptly rejected," Ramirez said. "The panel's decision also makes it clear that this seven-year litigation of gigantic proportions and scandalous maneuvers by ExxonMobil was absolutely unnecessary and served no legitimate useful purpose."

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