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The International Center for Settlement of Investment Disputes annulled an earlier decision that would have seen Venezuela pay more than a billion dollars to Exxon for the nationalization of two projects it ran in the country.
The news was announced by a lawyer for the Venezuelan government, and the sum that has been spared Caracas, according to Reuters, is $1.4 billion. The initial award for damages from the ICSID, dating from 2014, was for $1.6 billion but Venezuela argued that another $908 million that the International Chamber of Commerce ruled to be paid to Exxon should be deducted from the initial reward.
The ICSID said the annulment only concerned parts of the sum, without providing any further details. Still, even at $1.6 billion, the compensation was substantially lower than what Exxon had asked for: $14.7 billion.
Exxon operated the Cero Negro heavy oil project in Venezuela and one smaller one, La Ceiba, before Hugo Chavez’s government seized the assets in the mid-2000s, as part of a strategy to redirect the profits away from Venezuela’s mineral resources, telecoms, and agriculture industries and toward social programs. However, Exxon, along with many other companies, were naturally unhappy with these developments and challenged the legality of the nationalization at international courts.
At the time, Exxon said that it had discussed possible partnership with PDVSA, the state-owned oil company, and the government, but the two sides had failed to agree on mutually acceptable compensation.
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An Exxon filing to the Securities and Exchange Commission from 2014 showed that its Venezuelan assets had 425 million barrels of crude in proved reserves and a net book value of $750 million.
After this latest ruling from the ICSID Exxon said it will “continue to evaluate its legal rights and determine next steps.”
Venezuela is still facing more than 20 court cases related to the nationalization wave.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.