World Bank arm says Venezuela owes nearly $9bn to ConocoPhillips

A sculpture, depicting an oil derrick in a hand, stands outside of the Petroleos de Venezuela SA (PDVSA) building ahead of government debt meetings in Caracas, Venezuela, on Monday, Nov. 13, 2017.
A sculpture, depicting an oil derrick in a hand, stands outside of the Petroleos de Venezuela SA (PDVSA) building ahead of government debt meetings in Caracas, Venezuela, on Monday, Nov. 13, 2017.

Financially struggling Venezuela must pay Houston’s ConocoPhillips $8.7 billion for the government’s expropriation of the company’s investments in Venezuela more than a decade ago, a legal dispute arm of the World Bank ruled Friday.

The new tribunal ruling keeps a focus on Houston-based Citgo Petroleum, the multibillion-dollar U.S.-based refining arm of Venezuela. Citgo is considered the top prize for companies that Venezuela owes billions of dollars if the country can’t afford to pay in cash installments.

The new ruling is even more troubling news for the socialist nation that’s already undergoing a geopolitical and financial crisis, as well as a fight over the nation’s leadership with President Nicolás Maduro being challenged by opposition leader Juan Guaidó, who’s declared himself as interim president. A massive power outage even swept across much of Venezuela on Thursday.

And Venezuela, an oil-rich nation, is producing just more than 1 million barrels of crude a day, the lowest volumes in roughly three decades.

The World Bank’s International Centre for Settlement of Investment Disputes previously ruled in ConocoPhillips’ favor in 2013, but the financial award of $8.7 billion wasn’t determined until Friday.

“We welcome the ICSID tribunal’s decision, which upholds the principle that governments cannot unlawfully expropriate private investments without paying compensation,” said ConocoPhillips General Counsel Kelly Rose.

Venezuela can still contest the ruling.

A separate tribunal last year awarded ConocoPhillips $2 billion from Venezuela, and they reached a settlement involving an initial $500 million payment last year with additional quarterly payments through 2022.

However, it will be much harder for Venezuela to pay the newer and larger penalties in cash, even on a delayed payment system. And that’s where assets like Citgo come into play. Other companies also are seeking penalty payments from Venezuela, so there are no simple legal answers. And Russia’s Rosneft holds a lien over Citgo as collateral for its loans to Venezuela’s state oil company.

With the White House’s support, the opposition leadership in Venezuela recently appointed a new board of directors and interim leadership for Citgo, ousting the top Maduro loyalists.

In a recent interview before the new tribunal ruling, ConocoPhillips Chairman and CEO Ryan Lance acknowledged he’s eyeing the proceedings with Citgo.

“We’re really watching it closely because it’s a considerable asset for the Venezuelans,” Lance said. “It does represent an asset that’s held in ownership of the Venezuelans outside of their country, so everybody is trying to focus on that and figure out where the pecking order stands for the value of those assets.”

Lance added, “It’s safe to say any asset they own outside of Venezuela we are very aware of, and that includes Citgo.”

Lance acknowledged the plight of feeling concern for Venezuela’s citizens while also having to fight for ConocoPhillips’ interests.

“Unfortunately the country is in an awful state right now. It’s not the citizens’ fault, but it’s the government’s fault for kind of leading them astray from our perspective,” he said. “We’re using all the tools we can to make sure we get our fair share back out of what’s due to us for taking some pretty significant assets away from the company.”

This article first appeared on the Houston Chronicle – an Energy Voice content partner. For more from the Houston Chronicle click here.

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