ConocoPhillips files for arbitration against PDVSA for contractual compensation

RTT News

ConocoPhillips Files For Arbitration Against PDVSA For Contractual Compensation

10 October 2014

ConocoPhillips announced Friday that it has filed for arbitration under the rules of the International Chamber of Commerce or ICC against Petroleos de Venezuela or PDVSA, the Venezuela state oil company, for contractual compensation related to the Petrozuata and Hamaca heavy crude oil projects.

ICC arbitration is a separate and independent legal action from the investment treaty arbitration against the government of Venezuela, which is pending before an arbitral tribunal under the World Bank’s International Centre for Settlement for Investment Disputes or ICSID.

In September 2013, the ICSID tribunal ruled that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments. The arbitration process to determine compensation owed by Venezuela under the investment treaty for ConocoPhillips’ expropriated investments is progressing as planned.

"By filing ICC arbitration against PDVSA, we are pursuing contractual remedies that are available to us. In addition, we continue to look forward to a favorable outcome in the final stage of our ICSID arbitration," said Janet Langford Kelly, senior vice president, Legal, General Counsel and Corporate Secretary.

In the early 1990s, in order to induce foreign investments in its heavy oil projects in the Orinoco Belt, Venezuela created a new fiscal framework that applied specifically to these projects. Relying on these terms, ConocoPhillips helped Venezuela develop the Petrozuata, Hamaca and Corocoro projects with its technology and substantial long-term investments.

However, in the summer of 2007, the government expropriated ConocoPhillips’ investments in their entirety without paying compensation.

On Thursday, Exxon Mobil Corp. (XOM: Quote) was awarded $1.6 billion by the World Bank’s international arbitration court in its case against the Venezuelan government over expropriation of the company’s assets by the government in 2007.

The International Center for Settlement of Investment Disputes, or ICSID, awarded the amount to Exxon Mobil as compensation for its investments in the Cerro Negro project that was nationalized by the Venezuelan government. Exxon Mobil had sought $16.6 billion for expropriation of the assets by Venezuela.