It was an excellent week for the petroleum giant Exxon Mobil Corporation (NYSE:XOM), as it won $1.6 billion in settlement claims against the Venezuela Government for seizing its assets back in 2007.
ICSID, International Centre for Settlement of Investment Disputes, announced its judgement in favor of the company for its investment in the Cerro Negro project and associated losses. Exxon Mobil Corporation (NYSE:XOM) initially filed for $14.7 billion in settlements after it refused to partner with Petroleos de Venezuela SA, state-owned refinery.
The most valuable global oil company said in an email, “Our goal with the arbitration was to seek compensation for the fair market value of assets that were expropriated. Exxon Mobil’s affiliate engaged in extensive discussions with PDVSA and government officials but was unable to reach agreement on fair compensation.”
The only bright side for the country’s president, Nicolas Maduro, is that the legal settlement would remove any legal obstacles hindering the sale of PDVSA’s Citgo Petroleum Corp, as said by Gurpal Dosanjh and Vincent G. Piazza, Bloomberg Intelligence anslysts. They further added,
“The potential for a higher award, more than Venezuela could afford to pay, may have deterred potential suitors for Citgo, which is ultimately owned by Venezuela, amid fears of lawsuits against the nation’s foreign assets.”
The settlement amount would come down to $1 billion after considering the payments made by Venezuela in 2012 after another settlement announced by the International Chamber of Commerce, ICC. The settlement included payment of $907.6 million to Exxon Mobil after taking off $161 million in counterclaim by PDVSA.
The problems started back in 2007 when Chavez’s government set a final date for accepting the contract and compensation terms set by the government or face seizure of their respective assets. Both ConocoPhillips (NYSE:COP) and Exxon Mobil Corporation (NYSE:XOM) rejected the terms and their assets were seized.
This article has been written by Prakash Pandey and edited by Serkan Unal.