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Venezuela says it will pay under $1 bn to Exxon over 2007 nationalisation

16 October 2014

On October 9 the World Bank’s ICSID tribunal awarded Exxon Mobil $1.6 billion compensation for its nationalised assets in Venezuela. The case relates to the 2007 takeover of a large heavy crude project in the Orinoco region by then president Hugo Chavez's government.

“The Tribunal has found that the expropriation was conducted in accordance with due process,” ICSID said on its website.  This means the compensation only reflects the value of the assets, not alleged damages and prejudice caused.

Venezuela’s socialist government hailed the long-awaited decision as a victory given the US multinational’s claim for a far larger award. It also said it would deduct a previous $0.9 bn award made by another international tribunal, the Paris-based International Chamber of Commerce (ICC), which the state oil company PDVSA paid to Exxon Mobil in 2012.

This would mean the final payment would be under $1 bn, the oil ministry said. Venezuela is hailing the outcome as a victory for its sovereignty over rapacious Western multinationals, and oil workers were shown celebrating on state TV.

Exxon, though, has also expressed satisfaction, saying the decision vindicated its view it had not been properly compensated.

ConocoPhillips also has large outstanding nationalisation cases before the ICC and ICSID against PDVSA, and the Exxon Mobil ruling could set a precedent. Venezuela might have to pay around $4 bln, about 20% of what Conoco  wants.

Venezuela is facing more than 20 arbitration cases over the Chavez-era nationalisations.
These arbitration payments will put further strain on Venezuela’s economy, which faces a collapsing economy, rampant inflation and looming bond payments.

PDVSA could sell Citgo Petroleum Corp, its US refining unit, which would provide an injection of liquidity for the company and the government.

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