2012: $10 Billion: Hugo Chavez’s Win, EXXON’s Rex Tillerson’s Loss

In the 1990’s Venezuela announced incentives for oil companies to develop the Orinoco Oil Belt. Royalty payments were reduced from 16.7% to 1%. The operations were to be joint ventures with PDVSA with the oil companies having a majority (51%) share.[1] Four projects were established by Chevron (US), BP(British), Total (France), Statoil (Norway) and EXXON (US).

By 2007, the four projects were producing about 620,000 BPD of crude oil [1]. The projects were very profitable with Chevron estimating its margin at $24 per barrel [2] The Venezuelan government decided that the companies no longer needed “incentives” to develop the Orinoco fields. The companies were given until June 27,2007 to agree to new terms. The joint ventures were to be converted to 60% ownership by PDVSA from 51% ownership by the companies.[2] Royalty payments were to be increased to 33% from 1%. Chevron, Stahtoil, BP and Total signed agreements. Chevron estimated that its margin would be $13/barrel. [2]

EXXON refused and was asked to cease operations and leave Venezuela. Exxon’s field operations were taken over by PDVSA. The parties began negotiations for compensation for the value of EXXON’s investments. EXXON asked for a ruling from The World Bank’s Centre for Settlement of Investment Disputes (ICSID).[3] The US State Department issued a statement that it “fully supported the efforts of EXXON”. [5] The Washington Post editorialized: “Two cheers for ExxonMobil…In standing up to Mr Chavez."[6]

Exxon’s CEO was Rex Tillerson. In 2006, EXXON was the largest corporation in the world with revenue of $340 billion/year-about double Venezuela’s GDP. EXXON claimed $12 billion in compensation. EXXON’s large arbitration claim was also expected to have an effect on other countries since the claims showed that governments needed to think carefully before doing anything that EXXON did not like [2].

 The final ICSID ruling was for compensation of $1.6 billion.[4] Exxon’s loss was seen by developing country governments as an important victory [7]


   

1.Venezuela Increases Taxes, Plans Increased Control over Orinoco Oil, Venezuelanalysis, August 30, 2006.

2. Boue, Juan C., Enforcing Pacta Sunt Servanda? Conoco-Phillips and Exxon-Mobil Versus the Bolivarian Republic of Venezuela, Journal of International Dispute Settlement, 2014

3. Stein, Kenneth, Exxon-Venezuela arbitration dispute: Next Steps and Impact on Future investor-state disputes under ICSID, Journal of World Energy Law and Business, 2011.

4. Reuters, Venezuela Ordered to Pay Exxon $1.6 billion for nationalization, October 9, 2014

5. Economic Times, US Court backs ExxonMobil in spat with Venezuela’s oil firm, February 14, 2008

6. Washington Post, Mr Chavez’s Bluff, ED, February 15, 2008

7. Weisbrot, Mark, Venezuela’s OPEC Stand is a win for Climate Change Campaigners, Venezuelanalysis,    March 6, 2012.  

Comments

Post a Comment

Popular posts from this blog

Image
  2020:U.S. Drug Monitoring Data Show that Venezuela is not a Major Source of Illegal Drugs On March 11, 2020, the Washington Office on Latin America (WOLA) released a Research Report authored by Geoff Ramsey and David Smilde: Beyond the Narcostate Narrative: What U.S. Drug Monitoring Data Says About Venezuela. [1] The Report concluded that: ·         “Venezuela is not a primary transit country for U.S. bound cocaine. About 90% of all    U.S.-bound cocaine is trafficked through Western Caribbean and Eastern Pacific routes, not through Venezuela’s Eastern Caribbean seas.” The Research Report relied on data from the U.S. Interagency Consolidated Counterdrug Database (CCDB), a multi-source collection of global illegal drug trafficking events that is gathered from intelligence data such as detection and surveillance as well as interdiction and law enforcement data. The authors noted that:” According to the Department of Defense ‘The ...
Read more

The Venezuela Reader - A Blog Focused on Recent History and Venezuela-U.S. Relations

Image
  The Venezuela Reader- A Blog Focused on Recent History and Venezuela-U.S. Relations My name is Leonard G.- I am The Venezuela Reader. I am a retired agricultural policy analyst living in the Washington, DC area. After retirement and when Covid closed off many activities, I began reading about US foreign policy. I was particularly intrigued by Venezuela. So, I began reading about Venezuela five years ago and haven’t stopped. Faced with mountains of paper, I took it on myself to summarize events in Venezuela’s history and in its relations with the US. I challenged myself to write one-page summaries which are factually accurate and documented with outside sources -newspaper articles, academic articles, government reports. I have already drafted over 200 one-page summaries covering events and milestones including elections, riots, court rulings, US sanctions, oil policies, social policies, food and agriculture, racism, drug trafficking, important reports, and biographies. I am...
Read more
Image
  2025:Former United Nations Drug Official Calls Venezuelan Narco-State Narrative a Great Hoax   Pino Arlacchii was the Executive Director of the United Nations Office on Drugs and Crime (UNODC) from 1997 to 2002. He recently wrote an article about the U.S. declaration that Venezuela is a “narco-state.” [1] His article was translated into English and released by Venezuelanalysis. [2] Here are excerpts from his article:[2]   Pino Arlacchi : The Great Hoax Against Venezuela: Oil Geopolitics Disguised as “War on Drugs” ·        “During my time as head of the United Nations Office on Drugs and Crime (UNODC), I frequently travelled to Colombia, Bolivia, Peru and Brazil, but never to Venezuela. There was simply no need. ·        “The Venezuelan government’s collaboration in the fight against drug trafficking was among the best in South America, rivalled only by Cuba’s impeccable record. This makes Trump’s nar...
Read more