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"Exxon wins freeze on $12 billion of Venezuelan assets By Michael
Erman
Thu Feb 7, 7:35 PM ET
NEW YORK (Reuters) - Exxon Mobil Corp (XOM.N) has won court orders
freezing up to $12 billion in Venezuelan assets around the world as it
fights for compensation for operations lost to President Hugo Chavez's
nationalization drive.
The largest U.S. company sought the asset freeze to guarantee
repayment should it win arbitration over the Cerro Negro heavy oil
project.
The move is the boldest challenge yet by an international oil major
against any of the governments around the world that have moved to
increase their holds on natural resources as energy and commodity
prices have soared.
"To me it sounds like a very aggressive tactic," said Stephen Zamora,
professor of international law at the University of Houston Law
Center.
"I can't really say that I'm aware this has been used in other
investment disputes. They may be trying to get the government to
settle."
Exxon -- which last week posted the largest ever year's profit by a
U.S. company -- said on Thursday it has received court orders in
Britain, the Netherlands and the Netherlands Antilles each freezing up
to $12 billion in assets of Venezuela state oil firm PDVSA. An Exxon
spokeswoman said the total that could be frozen worldwide was $12
billion.
Exxon also won a court order from the U.S. District Court for the
Southern District of New York in December freezing more than $300
million belonging to PDVSA, seeking to guarantee repayment should it
win the arbitration.
PDVSA, one of the largest suppliers of crude oil to the United States,
was not immediately available for comment. The White House and the
U.S. State Department also declined to comment.
Venezuela's sovereign bonds sold off after the court orders surfaced.
Left-winger Chavez, who regularly clashes with the Bush
administration, took over Exxon Mobil and ConocoPhillips (COP.N)
stakes in multibillion-dollar heavy oil projects in Venezuela's oil
region last June.
The move was part of the left-wing leader's drive to nationalize key
industries including utilities and telecommunications companies owned
by private companies.
CHALLENGE TO CHAVEZ
The news comes as a tough blow to Chavez, who suffered a stinging
defeat in a December referendum that would have let him run
indefinitely for reelection and enshrine socialism as the OPEC
nation's economic system.
PDVSA is already facing growing debt and increasing operational
problems that analysts attribute to underinvestment caused by the
company's massive contributions to Chavez's social programs.
But the near-term effect of the Exxon legal maneuver on PDVSA's day-to-
day operations was not immediately clear.
The South American nation has an extensive overseas refining network,
including the Citgo refining and marketing branch in the United
States.
Exxon said in court filings that recent estimates have placed PDVSA's
global asset value -- including its operations in Venezuela -- at over
$62 billion
PDVSA's European refining assets, principally a 50 percent share in
the German refining joint venture Ruhr Oel, were held through a
Netherlands Company PDV Europa BV, according to filings PDVSA made
with the U.S. Securities and Exchange Commission in 2006.
Exxon filed for arbitration in September with the International Centre
for Settlement of Investment Disputes.
Exxon has not specified how much it wants for the 41.7 percent stake
in the Cerro Negro project, but it has said its remaining book
investment in the project was about $750 million at the time the
assets were expropriated.
The move underscores Exxon's reputation for toughness in dealing with
foes as varied as governments and fishermen, as it has been willing to
wage prolonged legal battles to defend its interests around the
world.
Amy Meyers Jaffe, energy policy researcher at Rice's Baker Institute,
said the case could have far-reaching implications.
"These are precedents that are going to be important for what people
can and cannot do in the oil industry," she said.
ConocoPhillips spokesman William Tanner said his company "continues to
discuss an amicable resolution regarding the assets that were
expropriated in Venezuela."
Conoco filed for arbitration over the dispute in November.
Venezuela's benchmark global bond due 2027 lost 2.375 points in price
to be bid 98.938, while total returns offered by the country's debt
slipped 1.52 percent according to the JP Morgan EMBI+ index. "
"Exxon wins freeze on $12 billion of Venezuelan assets By Michael
Erman
Thu Feb 7, 7:35 PM ET
NEW YORK (Reuters) - Exxon Mobil Corp (XOM.N) has won court orders
freezing up to $12 billion in Venezuelan assets around the world as it
fights for compensation for operations lost to President Hugo Chavez's
nationalization drive.
The largest U.S. company sought the asset freeze to guarantee
repayment should it win arbitration over the Cerro Negro heavy oil
project.
The move is the boldest challenge yet by an international oil major
against any of the governments around the world that have moved to
increase their holds on natural resources as energy and commodity
prices have soared.
"To me it sounds like a very aggressive tactic," said Stephen Zamora,
professor of international law at the University of Houston Law
Center.
"I can't really say that I'm aware this has been used in other
investment disputes. They may be trying to get the government to
settle."
Exxon -- which last week posted the largest ever year's profit by a
U.S. company -- said on Thursday it has received court orders in
Britain, the Netherlands and the Netherlands Antilles each freezing up
to $12 billion in assets of Venezuela state oil firm PDVSA. An Exxon
spokeswoman said the total that could be frozen worldwide was $12
billion.
Exxon also won a court order from the U.S. District Court for the
Southern District of New York in December freezing more than $300
million belonging to PDVSA, seeking to guarantee repayment should it
win the arbitration.
PDVSA, one of the largest suppliers of crude oil to the United States,
was not immediately available for comment. The White House and the
U.S. State Department also declined to comment.
Venezuela's sovereign bonds sold off after the court orders surfaced.
Left-winger Chavez, who regularly clashes with the Bush
administration, took over Exxon Mobil and ConocoPhillips (COP.N)
stakes in multibillion-dollar heavy oil projects in Venezuela's oil
region last June.
The move was part of the left-wing leader's drive to nationalize key
industries including utilities and telecommunications companies owned
by private companies.
CHALLENGE TO CHAVEZ
The news comes as a tough blow to Chavez, who suffered a stinging
defeat in a December referendum that would have let him run
indefinitely for reelection and enshrine socialism as the OPEC
nation's economic system.
PDVSA is already facing growing debt and increasing operational
problems that analysts attribute to underinvestment caused by the
company's massive contributions to Chavez's social programs.
But the near-term effect of the Exxon legal maneuver on PDVSA's day-to-
day operations was not immediately clear.
The South American nation has an extensive overseas refining network,
including the Citgo refining and marketing branch in the United
States.
Exxon said in court filings that recent estimates have placed PDVSA's
global asset value -- including its operations in Venezuela -- at over
$62 billion
PDVSA's European refining assets, principally a 50 percent share in
the German refining joint venture Ruhr Oel, were held through a
Netherlands Company PDV Europa BV, according to filings PDVSA made
with the U.S. Securities and Exchange Commission in 2006.
Exxon filed for arbitration in September with the International Centre
for Settlement of Investment Disputes.
Exxon has not specified how much it wants for the 41.7 percent stake
in the Cerro Negro project, but it has said its remaining book
investment in the project was about $750 million at the time the
assets were expropriated.
The move underscores Exxon's reputation for toughness in dealing with
foes as varied as governments and fishermen, as it has been willing to
wage prolonged legal battles to defend its interests around the
world.
Amy Meyers Jaffe, energy policy researcher at Rice's Baker Institute,
said the case could have far-reaching implications.
"These are precedents that are going to be important for what people
can and cannot do in the oil industry," she said.
ConocoPhillips spokesman William Tanner said his company "continues to
discuss an amicable resolution regarding the assets that were
expropriated in Venezuela."
Conoco filed for arbitration over the dispute in November.
Venezuela's benchmark global bond due 2027 lost 2.375 points in price
to be bid 98.938, while total returns offered by the country's debt
slipped 1.52 percent according to the JP Morgan EMBI+ index. "
