EL UNIVERSAL

A court order that overturned an injunction US oil major Exxon had won to freeze up to USD 12 billion in Venezuelan oil firm Pdvsa's assets  is likely to worsen the conflict between the two corporations over compensation for nationalization last year of heavy crude oil project Cerro Negro.

A British judge reversed the precautionary injunction last Tuesday, and ordered Exxon Mobil to pay court costs. The judge's decision propped up Venezuela's stance in the legal dispute that has shaken world energy markets and pushed oil prices above USD 110 per barrel, Reuters said.

The ruling also minimized the possibilities to find a friendly solution to the dispute in which President Hugo Chávez -an anti-US revolutionary- is fighting against Exxon Mobil -a global oil giant known for facing long legal battles.

"The fact that Venezuela managed to get the precautionary measure reversed puts the country back in the game, and this means the battle is more likely to go on," according to Joseph Profaizer, an expert in international arbitration with Washington-based Paul, Hastings, Janofsky & Walker.

Exxon Mobil has filed two arbitration complaints against Caracas, seeking at least USD 5 billion as compensation for the nationalization in 2007 of Cerro Negro project, even though Venezuela claims it owes Exxon Mobil less than USD 1 billion.

Pdvsa has severed trade ties with the Texas company, while Exxon Mobil has started to reject Venezuela's crude oil shipments for Louisiana-based Chalmette refinery, where each of the two corporations owns a 50 percent stake.

Venezuela is expected to put pressure on the London court to order Exxon Mobil to pay damages in connection with the freezing injunction. Such a ban pushed Venezuelan debt bonds down, as investors feared the move could jeopardize Venezuela's vital oil revenues.

Further, Chávez vowed to sue Exxon Mobil -which he branded as a tool of Washington. He claims Exxon Mobil failed to pay taxes on oil production from Cerro Negro upgrader.

A tough deal
Exxon Mobil may resort to the court orders it won in the Netherlands and the Netherlands Antilles to keep the USD 12 billion assets frozen. However, Venezuela claims the Netherlands court should follow the same guidelines as the British court within 48 hours.

Exxon Mobil, however, said the freezing of assets is still in force.

Pdvsa is likely to insist in paying Exxon Mobil the "book value" of the firm's assets in Venezuela. At book value, such assets amount to USD 750 million.

Meanwhile, the US oil major stresses that Venezuela should pay at least USD 5 billion, based on the future value of the profits the firm could have obtained if it had continued to participate in Cerro Negro.

The two parties have suggested they could negotiate an agreement under which Pdvsa is to transfer Exxon its 50 percent stake in Chalmette refinery. However, analysts believe this is less likely following the London court ruling.

The lifting of the freezing injunction could result in a more aggressive Exxon Mobil, as the company's legal actions were intended to discourage other countries from changing the terms of the agreements, said Patrick Esteruelas, an analyst with New York-based Eurasia Group.

"Besides, Pdvsa is under less pressure to make concessions to Exxon Mobil once the freezing injunction has been reversed," he added.
Translated by Maryflor Suárez R.