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By Robert Rapier on Feb 8, 2008 with no responses

Exxon Freezes Venezuelan Assets

This came as a surprise to me:

Exxon wins freeze on $12 billion of Venezuelan assets

NEW YORK (Reuters) – Exxon Mobil Corp has won court orders freezing up to $12 billion in Venezuelan assets around the world as it fights for compensation for operations lost to President Hugo Chavez’s nationalization drive.

The largest U.S. company sought the asset freeze to guarantee repayment should it win arbitration over the Cerro Negro heavy oil project.

The move is the boldest challenge yet by an international oil major against any of the governments around the world that have moved to increase their holds on natural resources as energy and commodity prices have soared.

“To me it sounds like a very aggressive tactic,” said Stephen Zamora, professor of international law at the University of Houston Law Center.

“I can’t really say that I’m aware this has been used in other investment disputes. They may be trying to get the government to settle.”

Does not bode well for Chavez and company. I am beginning to think I may get some of my money back that Chavez has stolen (as I am a shareholder of one of the companies whose assets were seized):

The news comes as a tough blow to Chavez, who suffered a stinging defeat in a December referendum that would have let him run indefinitely for reelection and enshrine socialism as the OPEC nation’s economic system.

PDVSA is already facing growing debt and increasing operational problems that analysts attribute to underinvestment caused by the company’s massive contributions to Chavez’s social programs.

Amy Meyers Jaffe, energy policy researcher at Rice’s Baker Institute, said the case could have far-reaching implications.

“These are precedents that are going to be important for what people can and cannot do in the oil industry,” she said.

I have been suggesting that we should go after Venezuela’s Citgo refineries in the U.S. as compensation for the stolen assets. Looks like that may not be out of the realm of possibility. Of course given the news that Citgo is cutting maintenance to save money, such a move would be better sooner rather than later.

Update: Additional coverage from CNN – Exxon to freeze $12B in Venezuelan assets

“On Jan. 24, the High Court of England and Wales was satisfied that there is a real risk that PdVSA will dissipate its assets and accordingly entered a Worldwide Freezing Order ex parte,” Exxon said in the filing to the New York court. The order prohibits PdVSA from “disposing of its assets worldwide up to a value of $12 billion whether directly or indirectly held.”

Venezuela will pay two European oil companies that were partners in other Orinoco heavy oil projects less than half the estimated market value of their stakes, according to a copy of the compensation agreement reviewed by Dow Jones Newswires.

That agreement offers an inkling of what ExxonMobil and ConocoPhillips could be expecting as they carry on compensation talks with PdVSA.