Venezuela To Pay Exxon Mobil $908 Million Instead of $7 Billion

An international arbitration panel awarded U.S. oil major Exxon Mobil Corp. about $908 million in a verdict over oil assets nationalized by Venezuelan President Hugo Chavez in 2007. The payout is substantially lower than the $7 billion that Exxon was seeking in restitution. Venezuelan state oil company Petroleos de Venezuela SA (PdVSA) got off lightly, to put it mildly.  Both parties are still awaiting a decision on the suit filed by Exxon's local subsidiary, Mobil Cerro Negro Ltd., against Venezuela in front of the World Bank's International Centre for Settlement of Investment Disputes, or ICSID, where the Chavez administration is facing around 20 pending cases. With billions in potential payouts looming, the number of cases has been the source of constant concern for holders of Venezuelan sovereign bonds.

Hugo Chavez

The verdict comes four years after Exxon, the world's largest publicly traded oil company, left Venezuela in a spat with the country's government, which decreed that the state oil monopoly would have the majority stake in joint ventures with foreign partners. By law, PdVSA now holds at least 60% of all oil projects.

Exxon has said that it invested around $750 million into the Cerro Negro facility. The company reduced its claim to $7 billion from an initial claim of $12 billion.

PdVSA posted a net profit of $4 billion during the first six months of 2011. The Venezuelan oil monopoly has faced declining oil production and cash flow problems in recent years as Chavez diverts large portions of revenue toward social projects, which critics say has resulted in insufficient investments into maintenance. (WSJ, 1/2/2012)