May 16, 2021

Venezuela Will Not Recognize World Bank Ruling in Exxon Case

Exxon took Venezuela to the World Bank’s International Center for Settlement of Investment Disputes, or ICSID, seeking as much as $12 billion in compensation after Mr. Chavez ordered the nationalization of the Cerro Negro oil project in 2007.

“I tell you now: We will not recognize any decision by ICSID,” Mr. Chavez said during a televised speech. He has repeatedly accused the U.S. oil major of using unfair deals in the past to “rob” the South American OPEC member of its resources.

“They are trying the impossible: to get us to pay them,” he said. “We are not going to pay them anything.”

It was not immediately clear whether Mr. Chavez was also referring to about 20 other cases that Venezuela faces before the World Bank’s arbitration tribunal that were triggered by a wave of state takeovers in recent years.

They include separate multibillion-dollar proceedings brought by ConocoPhillips, another major American oil company.

Last week, another arbitration panel, this one with the International Chamber of Commerce, awarded Exxon $908 million in a separate case relating to the Cerro Negro nationalization.

On Saturday, Venezuelan Oil Minister Rafael Ramirez said he did not expect a verdict in Exxon’s World Bank case before the end of this year. Exxon said it was due to start being argued in February.

Both cases have been closely watched by the industry for precedents in future disputes between companies and oil-producing countries, which have increasingly sought a greater share of revenue as prices soar and new reserves become tougher to find.

For years, Venezuela’s socialist leader has accused foreign oil companies of plundering the nation’s reserves, but he has also maintained close ties with many of them.

Some lawyers said the decision by the International Chamber of Commerce covered only a commercial dispute between Exxon and the state oil company PDVSA over earnings Exxon lost as a result of the takeover.

By contrast, the World Bank case is over compensation for Exxon’s assets, and experts say it could yield a larger award.

The government has insisted Exxon receive only slightly more than the $750 million it said it invested in the project. Last September, Venezuela offered to settle for $1 billion.

For years, Mr. Chavez has confronted oil companies with tax increases and contract changes aimed at increasing revenue from the industry to fund state-led anti-poverty development programs.

Venezuela’s push to boost control over its oil industry has been followed by similar efforts in other oil-producing nations. Critics say it has scared investors away from Venezuela and left crude production stagnant.

But some oil companies have remained eager to invest in Venezuela’s Orinoco extra heavy oil belt, which is considered one of the world’s largest mostly untapped reserves of crude.

Chevron of the United States and Repsol of Spain both signed deals in 2010 for new multibillion-dollar projects there.

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