Petroleos de Venezuela SA, the state oil company, said it was given 60 days to pay Exxon Mobil Corp. about $255 million in cash to settle an arbitration claim over assets seized by Hugo Chavez in 2007.
The cash payment will settle a $907 million ruling by the New York-based International Chamber of Commerce, adding to $191 million of Exxon debt that the Venezuelan company will cancel and $300 million from frozen funds in a New York account, PDVSA said on its website today. The ICC deducted $160 million in counterclaims from the ruling provided the payment is made in 60 days, PDVSA said.
Exxon, the world’s largest oil company by market value, originally sought to freeze $12 billion of PDVSA assets as compensation for the nationalization of the Cerro Negro heavy-crude project in the Orinoco belt. The freeze was overturned by a U.K. court in March 2009, leading Exxon to reduce its arbitration claim to $7 billion in 2010.
“The government of Venezuela has always indicated that it is willing to compensate investors for decisions made in the strategic interest of the country,” PDVSA said in a statement today.
The ICC handed Exxon the ruling for a net $746.9 million payment on Dec. 23, according to a copy of the document obtained by Bloomberg News today.
Exxon Mobil was the first international oil company to abandon Venezuela after Chavez expropriated oil assets. The World Bank’s International Centre for Settlement of Investment Disputes, or ICSID, is also due to rule on the claim in a suit filed against the Venezuelan government.
“This ICC arbitration award represents recovery on a limited, contractual liability of PDVSA that was provided for in the Cerro Negro project agreement,” Exxon spokesman Patrick McGinn said today in an e-mailed response to questions. “The larger ICSID arbitration against the government of Venezuela is ongoing and is expected to be argued in February.”
Chavez forced foreign oil producers into joint ventures as minority partners in 2007 and is in international arbitration with Exxon and ConocoPhillips, which rejected Venezuela’s revised terms. The Cerro Negro venture refined tar-like crude into synthetic oil from wells in the Orinoco belt.
“The amount awarded represents a huge success for PDVSA, which has said all along that the amount claimed was grossly exaggerated,” George Kahale, a lawyer who at New York-based Curtis who represents PDVSA, said today in an e-mailed response to questions. “Remember that this is the case that began with the $12 billion freezing order in London.”
PDVSA set aside about $1 billion to $1.5 billion in anticipation of the judgment, Credit Suisse said in June.
Exxon recognizes Venezuela’s legal right to expropriate assets subject to compensation at fair market value, Exxon’s McGinn said.