 |
March 10, 2008 |
|
|
|
 |
PETROLEOS DE VENEZUELA: May Rule on Case With Exxon This Week Judge Paul Walker of The Royal Court of Justice may rule on the US$12 billion asset freeze legal dispute between Exxon Mobil Corp. and Petroleos de Venezuela SA this week, after he finishes hearing both of the parties' arguments, Reuters reports. Bloomberg News says that the ruling was expected since last week. As reported in the Troubled Company Reporter-Latin America on March 5, 2008, Exxon Mobil asked the London High Court to uphold the order freezing US$12 billion in Petroleos de Venezuela's assets to support the arbitration process between both parties. The asset-freeze order against Petroleos de Venezuela was made so that Exxon Mobil would be able to extract compensation should it win a pending arbitration. Petroleos de Venezuela has appealed the asset-freeze order and asserted that the U.K. court doesn't have the authority to award the injunction because the case involved U.S. and Venezuelan firms. Petroleos de Venezuela also said that it wasn't trying to put its assets "beyond reach," Reuters notes. Exxon Mobil's Chief Executive Rex Tillerson said during the company's yearly meeting with analysts that due to the lack of talks with Petroleos de Venezuela on working out fair compensation for the assets, Exxon Mobil had no choice but to pursue its right for arbitration, Sheila McNulty at The Financial Times Limited relates. Judge Walker said that he didn't accept an argument by Exxon Mobil, which said that the case was comparable to an earlier one in which a freeze was upheld, Reuters says, citing Venezuelan Ambassador Samuel Moncada. The judge questioned Exxon Mobil's referring to past cases of companies with assets in England, Dow Jones Newswires relates. Dow Jones says that Judge Walker agreed that Petroleos de Venezuela has no connection to England and has questioned Exxon Mobil's assertions that Petroleos de Venezuela may have English bank accounts. According to Dow Jones, Petroleos de Venezuela had argued that the case doesn't fall under U.K. jurisdiction as the company isn't an English company and has no assets, businesses or bank accounts in the U.K. and that the U.K. assets owned by its joint venture with Finnish firm Neste Oil are too indirect to be taken into account. Judge Walker said that it didn't matter where Petroleos de Venezuela has assets, as long as it had US$12 billion in assets, questioning Exxon Mobil's attorneys on why they were complaining about the Venezuelan firm's potentially moving assets elsewhere, Dow Jones reports. Exxon Mobil's lead lawyer Catherine Otton-Goulder told the court that even if there isn't a connection between Petroleos de Venezuela and England, it should still be possible for the freezing order to be made in an English court, Dow Jones notes. Dow Jones further cited Ms. Otton-Goulder as saying, "if the judge were to serve an order, that would have a huge impact on Petroleos de Venezuela's ability to conduct business and that the Venezuelan company would be likely to abide by the freezing order in order to maintain its international reputation." Once assets are moved to Venezuela, or money is spent in the country, then the assets won't be available for use in any compensation pay-out, she added. "How can a foreign court decide how PdVSA's money is spent in Venezuela? It's ridiculous," Samuel Moncada, Venezuela's ambassador to the U.K., commented to Dow Jones. Meanwhile, Gordon Pollock, Petroleos de Venezuela's lead lawyer, told the court that the company won't feel any "moral pressure" to abide by a U.K. court order freezing US$12 billion of its assets, Dow Jones reports. According to Dow Jones, Mr. Pollock said, "The idea that PdvSA's reputation will suffer if it were to ignore the order isn't really a sustainable one." Mr. Pollock told Caroline Binham at Bloomberg that Petroleos de Venezuela may ignore the ruling. "Defiance of this court would simply enhance our reputation in the areas where it mattered: in the corridors of OPEC," Mr. Pollock commented to Bloomberg. Petroleos de Venezuela failed to conclude the refinancing of a separate energy project due to the unavailability of the assets, Mr. Pollock added. Oil Minister Rafael Ramirez told Reuters that Petroleos de Venezuela will discuss an asset swap with Exxon Mobil involving their joint venture Chalmette, after a London court makes a ruling on the asset freeze case. According to Dow Jones, Exxon Mobil said in court that it is facing losses much greater than US$12 billion due to Venezuela's nationalization drive in the oil sector. Dow Jones notes that Ms. Otton-Goulder said during the hearing, "Today oil prices are around US$100 a dollar, the actual losses (for ExxonMobil) far surpass the losses from the formula." Formula used to calculate compensation, under the original joint-venture contract with Petroleos de Venezuela was "conservative," Dow Jones says, citing Ms. Otton-Goulder. Exxon Mobil said that using the formula, it is owed US$12 billion in compensation after the nationalization was implemented, Dow Jones relates. Petroleos de Venezuela argued that the compensation Exxon Mobil is asking for a shortfall in payments it would have received through to 2035 if the project hadn't been nationalized is unfair, according to Dow Jones. The report says that the value of Exxon Mobil's 41.6% stake in its Cerro Negro project in Venezuela is estimated to be between US$2 billion and US$3 billion. However, Petroleos de Venezuela doesn't want to offer over US$750 million in compensation. Petroleos de Venezuela SA's President and Venezuelan Energy and Oil Minister Rafael Ramirez told El Universal that Petroleos de Venezuela is "reengineering" its finances due to actions undertaken by Exxon Mobil. Allheadlinenews.com relates that Petroleos de Venezuela "shifted its petrodollar stash" to Swiss bank UBS. Petroleos de Venezuela said that its international financial business transactions would be done effective immediately at Switzerland, where banks maintain extreme privacy for its depositors, Allheadlinenews.com reports. Petroleos de Venezuela SA -- http://www.pdv.com/ -- is Venezuela's state oil company in charge of the development of the petroleum, petrochemical and coal industry, as well as planning, coordinating, supervising and controlling the operational activities of its divisions, both in Venezuela and abroad. The company has a commercial office in China. PDVSA is one of the top exporters of oil to the US with proven reserves of 77.2 billion barrels of oil -- the most outside the Middle East -- and about 150 trillion cu. ft. of natural gas. PDVSA's exploration and production take place in Venezuela, but the company also has refining and marketing operations in the Caribbean, Europe, and the US. * * * As of Feb. 14, 2008, Fitch Ratings held Petroleos de Venezuela SA's long-term issuer default rating and local currency long term issuer default rating at BB-. Fitch said the ratings outlook was negative. |
|
|
||
|
Today's Top Stories have been selected from the Troubled Company Reporter - Latin America. To receive the Full TCR-LA please CLICK HERE.
