• 4 minutes Ten Years of Plunging Solar Prices
  • 7 minutes Hydrogen Capable Natural Gas Turbines
  • 10 minutes World looks on in horror as Trump flails over pandemic despite claims US leads way
  • 13 minutes Large gas belt discovered in China
  • 43 mins Would bashing China solve all the problems of the United States
  • 3 hours 60 mph electric mopeds
  • 31 mins Pompeo's Hong Kong
  • 4 hours COVID 19 May Be Less Deadly Than Flu Study Finds
  • 17 mins Chicago Threatens To Condemn - Possibly Demolish - Churches Defying Lockdown
  • 2 hours New Aussie "big batteries"
  • 9 hours Let’s Try This....
  • 1 hour China to Impose Dictatorship on Hong Kong
  • 8 hours Oil Markets Could Soon Face A Devastating Supply Crunch
  • 10 hours Monetary and Fiscal Policies in Times of Large Debt:
  • 2 hours Fed Says It Will Begin Buying Corporate-Debt ETFs on Tuesday
  • 22 hours Backlash Against Chinese
  • 1 hour Iran's first oil tanker has arrived near Venezuela
  • 1 day The CDC confirms remarkably low coronavirus death rate. Where is the media?
Is Dieselgate Finally Over?

Is Dieselgate Finally Over?

Five years after Volkswagen’s dieselgate…

Prepare For Major Oil Market Consolidation

Prepare For Major Oil Market Consolidation

COVID-19 and the oil price…

John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

More Info

Premium Content

Venezuela to Compensate American Oil Companies for Nationalization?

If Cuba's Fidel Castro is America's favorite Latin American bête noire, then Venezuela's Hugo Chavez qualifies as Washington's reigning Prince of Darkness.
 
In 1960, Fidel Castro nationalized US business interests without compensation, bringing down on impoverished benighted country 51 years of sanctions that continue to the present day.
 
Similarly, four years ago Chavez completed the nationalization of foreign oil interests, transferring their shares to the state-owned petroleum company Petróleos de Venezuela, S.A., more commonly referred to by its acronym PDVSA.
 
The screaming was heard echoing through the boardrooms and canyons of Wall Street.
Now the picture appears to be shifting, as Venezuelan Energy Minister Rafael Ramirez told reporters this week, “We’ve never said we wouldn’t pay” the two U.S. multinational corporations Exxon-Mobil and Conoco-Phillips, “the only two that didn’t accept our laws and didn’t accept (the terms of a compensation deal for confiscated assets) and took the dispute to the World Bank’s International Center for the Settlement of Investment Disputes, or ICSID.”
 
As Ramirez is also the president of PDVSA, his comments should not be taken lightly. Ramirez added that the arbitration processes “are moving forward and we have to defend ourselves because those mechanisms are so perverse that if you don’t show up they execute you.”
 
Venezuela’s oil industry had been under private control until 1974, when Venezuela nationalized it, setting up PDVSA. Venezuela’s oil production is centered in the Orinoco Oil Belt, which analysts believe contains the world’s largest reserves of extra-heavy oil, with an estimated 300 billion recoverable barrels.
 
In the 1990s PDVSA began a so-called “oil opening,” where it allowed more and more foreign private companies to extract oil, via majority shares in joint ventures and the operating agreements.
 
In February 2007 Chavez announced a new law-decree to nationalize the last remaining oil production sites that are under foreign company control, to take effect on 1 May, allowing the foreign companies to negotiate the nationalization terms. Under the new regulations, the earlier joint ventures, involving ExxonMobil, ChevronTexaco, Statoil, ConocoPhillips, and BP, were transformed give PDVSA a minimum 60 percent stake. The process completed a government initiative begun in 2005, when the Chavez administration transformed earlier “operating agreements” in Venezuela’s older oil fields into joint ventures with a wide variety of foreign companies. Thirty out of 32 such operating agreements were transformed by the end of 2005 - only two challenged the transition in court, and no guesses as to who the companies were. Most foreign companies accepted the new arrangements, including Chevron, Statoil, Total and BP, but ExxonMobil and ConocoPhillips refused.
 
Ramirez had not referred to the compensation issue since expressing confidence last November when he averred that Venezuela would emerge victorious in the arbitration proceedings, saying then that the multinational companies’ aspirations were “unreasonable.”
 
If not “unreasonable,” then certainly “greedy,” as according to media reports, Exxon-Mobil alone is demanding compensation ranging from between $7 and 12 billion.

Ramirez said that said Venezuela scored a victory at the Washington-based ICSID in June 2010, when the World Bank tribunal unanimously ruled that it did not have jurisdiction over any dispute that dated back prior to 2006.
 
When Chavez’s government was sued before the ICSID for its 2007 nationalization policies ExxonMobil and ConocoPhillips not only demanded compensation for seized assets, but also refunds for higher taxes and royalties paid prior to 2006.
 
Sure gonna be interesting to watch.

By. John C.K. Daly of OilPrice.com


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News