ConocoPhillips files for arbitration against PdV

ConocoPhillips has filed for arbitration against Venezuelan state-owned oil company PdV at the International Chamber of Commerce (ICC) in Paris seeking compensation for the expropriation of its stakes in the Petrozuata and Hamaca extra-heavy crude upgraders in Venezuela.

The move piles pressure on Caracas a day after the World Bank's International Centre for Settlement for Investment Disputes (Icsid) issued a ruling that obliges the government to pay $1.6bn to ExxonMobil for the seizure of the firm´s Venezuelan assets.

The expropriations affecting the two US companies took place in 2007.

"By filing ICC arbitration against PDVSA, we are pursuing contractual remedies that are available to us," said Janet Langford Kelly, ConocoPhillips senior vice president for legal, general counsel and corporate secretary. "In addition, we continue to look forward to a favorable outcome in the final stage of our ICSID arbitration."

ConocoPhillips said its filing for ICC arbitration is "a separate and independent legal action from the investment treaty arbitration against the government of Venezuela, which is pending before an arbitral tribunal under the (Icsid)."

The Icsid panel ruled in September 2013 that Venezuela unlawfully expropriated ConocoPhillips' assets in Venezuela, including its 51pc stake in 130,000 b/d PetroZuata, its 30pc stake in 160,000 b/d Hamaca and its 32.5pc stake in the 25,000 b/d offshore Corocoro crude oil production joint venture in the Gulf of Paria.

PdV now owns 100pc of PetroZuata, whose name was changed to PetroAnzoategui.

PetroPiar, formerly known as Hamaca, is now controlled by PdV with 70pc. Chevron holds the remaining 30pc.

The 25,000 b/d Corocoro offshore oil field in the Gulf of Paria is now called PetroSucre. Italy´s Eni holds 24pc, with 76pc for PdV. Prior to the takeover, ConocoPhillips held 32.5pc, Eni had 26pc and Taiwanese Opic held 6.5pc.

Icsid arbitrators judging the ConocoPhillips compensation claim against Venezuela are not expected to issue a final award "for at least two more years," a PdV official with direct knowledge of the case tells Argus.

ConocoPhillips demanded $30bn in total compensation when it filed its initial arbitration claim at Icsid at end-2009.

But PdV is "confident that the final award will be substantially lower based on the precedent established by yesterday's decision on ExxonMobil's claim," the official said.

Yesterday´s Icsid award covered ExxonMobil´s 42pc stake in the Cerro Negro extra-heavy crude upgrader, now called PetroMonagas, and its 50pc stake in the La Ceiba upstream joint venture located in Lake Maracaibo.

A separate ICC arbitration panel previously had awarded ExxonMobil $904mn in contractual compensation related to Cerro Negro's expropriation in May 2007.

But the Icsid panel's award yesterday stipulates that "double recovery" is prohibited, possibly paving the way for PdV to reduce the ExxonMobil award to less than $1bn.

The Venezuelan upgraders process extra-heavy crude from Venezuela´s vast Orinoco oil belt.

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