Venezuela hints at ConocoPhillips settlement

Venezuela is indicating that it is prepared to settle a debt dispute with ConocoPhillips after the US independent took physical control of state-owned PdV's Bopec storage terminal at Bonaire early today and filed court orders in Aruba and Curacao to embargo PdV's assets on those islands.

ConocoPhillips imposed the pre-judgment attachments on the Dutch Caribbean assets in an effort to force PdV to pay $2bn in compensation that it was ordered to pay by the International Chamber of Commerce last month.

The liens on the ABC island assets, which handle over 16pc of Venezuela's oil exports, severely restrict PdV's capacity to load the VLCCs that it normally uses to ship crude to China and India, making it nearly impossible to fulfill its supply contracts to Asia, a ministry official told Argus.

Part of the exports goes toward servicing oil-backed loans from China.

Caracas is now suggesting that it will pay the compensation. "PdV categorically rejects the actions undertaken by ConocoPhillips of seizing the Venezuelan oil company's assets in the Caribbean," the energy ministry said in a series of tweets that were posted late yesterday but were subsequently deleted. PdV "is committed to honoring the decisions stemming from the arbitration award."

The energy ministry's swift deletion of the remarks indicating that PdV would pay ConocoPhillips suggests that some officials in Venezuelan president Nicolas Maduro's government oppose a settlement with the US company ahead of Venezuela's scheduled presidential elections on 20 May.

"Paying any compensation at this time would make Maduro appear to have surrendered Venezuelan sovereignty to a Yankee multinational only days before the election," a presidential palace official said.

The elections have been widely condemned abroad as a fraudulent process to keep Maduro in power.

Two senior officials at Venezuela's energy ministry and PdV separately told Argus early today that PdV will pay the compensation to ConocoPhillips for the May 2007 expropriation of two Orinoco upgrading projects currently known as Petropiar and Petro San Felix.

"The funds likely will come in part from central bank's international reserves," a ministry official said. The bank's international reserves totaled about $9.4bn at the end of April.

The ministry official said PdV has had no direct contact with ConocoPhillips on the matter so far.

ConocoPhillips has previously said it would take all measures to enforce the arbitration award.

Beyond the political fallout, the risk for PdV is that other creditors will follow suit. The company has already faced numerous seizures of tankers and oil cargoes in the Dutch Caribbean in recent years, and has quietly settled them. PdV called most of its tankers out of the Caribbean into Venezuelan waters this week.

Curacao government officials have said they are taking all measures to ensure fuel supply in the current crisis.

PdV owns the 10mn bl Bopec storage facility on Bonaire and leases the 320,000 b/d Isla refinery and Bullen Bay terminal on Curacao. PdV also leases storage at US company NuStar´s St Eustatius terminal and additional storage in Aruba.

The facilities are critical to PdV´s import and export operations by facilitating storage, transshipment and crude blending.