Saturday, February 9, 2008

PDVSA didn't have that many assets in Britain, and Venezuela would appeal against the ‘transitory’ measures

Caracas Daily Journal (Jeremy Morgan): News that courts in the United States, Britain and the Netherlands had put a stay on assets held in their countries by the state oil corporation, Petróleos de Venezuela (PDVSA), set off a clamour of criticism in Caracas.
Energy Minister Rafael Ramírez dismissed the rulings, accusing ExxonMobil of "judicial terrorism" from the courts. The only thing ExxonMobil had achieved at a New York court was to have frozen $300 million of cash held by PDVSA, he said.
PDVSA has interests in six refineries in the United States through its subsidiary, Citgo. Reports say the U.S. ruling did not apply to assets held by Citgo.

The ruling in London was altogether much more severe. The court granted an injunction freezing PDVSA assets in Britain worth an estimated $12 million. PDVSA has interests in a refinery at Dundee, Scotland, and Eastham in England, and offices in London.

As to the Netherlands, PDVSA owns a stake in a refinery in Curacao and an oil center in the Dutch Antilles. The value of these interests has yet to be established. Ramírez insisted PDVSA simply didn't have assets worth even half as much as $12 billion in Britain. The minister, who is also president of PDVSA, said the rulings were "transitionary measures" against which the corporation would put its own case, and which Venezuela would overcome.

Venezuela had agreed to go to international arbitration, and Ramírez accused ExxonMobil of not complying with the rules. In Irving, Texas, ExxonMobil declined comment.

While Ramírez brushed aside the rulings, there was no shortage of reaction in Caracas. The first to kick in with public comment in the public domain was the leadership of the Catholic Church, which is often at odds with President Hugo Chávez.

The Venezuelan Episcopal Conference expressed concern about the possible impact of the assets freeze not only on international relations but also shortages of food and other basic needs in Venezuela. PDVSA recently set up a food distribution subsidiary.

The Archbishop of Coro, Mon-señor Roberto Lückert, a frequent and at times outspoken critic of the government, said the problem between ExxonMobil and PDVSA had arisen because of "the insensitivity and the lack of diplomatic delicacy of this government and those who direct the big economy of this country, which is PDVSA."

A former president of PDVSA, Guaicaipuro Lameda, warned that the dispute could bring serious consequences for the people most in need. The "lamentable incident" had been provoked by the government in a "fixation against that which is the global world, the transnationals, that which the United States and capitalism represent."

PDVSA had been managed in a different manner since 2002, and for purposes other than those to do with business, Lameda continued. "The consequences are what we're living with."

Carlos Romero, an academic specializing in international relations, said the ruling could have an impact on PDVSA's operations, sending out a "bad signal" to international markets. Romero argued that the dispute with ExxonMobil companies stemmed from bad management of agreements in the Orinoco Basin. Rather than play the patriot it would be better for the government to negotiate a solution, he said.

The opposition was slow off the mark, with the exception of Julio Borges of Primero Justicia, who urged the government to negotiate and compensate companies whose assets it had taken over. He saw negative consequences for the country and the citizens' wallets. The Venezuelan-American Chamber, Venamcham, said it didn't rule out the dispute having an impact on the economy.

The rulings stemmed from Chávez' decision that the state should have a majority interest in oil operations in the Orinoco Basin through "mixed companies" with PDVSA or its offshoot, Corporación Venezolana de Petróleo (CVP), in the driver's seat. Foreign partners in the old "association agreeements" re-placed by the new companies were to become minority partners or give up their interests. At the time, the attitude was one of take it or leave it.

United States companies led by ExxonMobil and Conoco-Phillips took the second option, vowing to go to international arbitration and the courts. The result so far has been the court rulings which have just come to light, apparently at the behest of ExxonMobil, reputedly the biggest oil outfit on the planet.

ExxonMobil held 50 percent of La Ceiba oil field and 41.7 percent of the Cerro Negro "strategic association" in the Orinoco Basin. PDVSA wanted 60 percent of both. ConocoPhillips had two big interests in the Orinoco Basin: 50.1 percent of Petroazuata and 40 percent in Ameriven. With the government insisting on its right to impose the new rules, the two companies opted for the exit.

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