Venezuela will not recognize World Bank ruling in Exxon case

Hugo Chavez

CARACAS, (Reuters) – Venezuelan President Hugo  Chavez said yesterday that his country would not recognize any  ruling by a World Bank tribunal in a multibillion-dollar  arbitration case with Exxon Mobil Corp.

Hugo Chavez

Exxon took Venezuela to the World Bank’s International  Center for Settlement of Investment Disputes, or ICSID, seeking  as much as $12 billion in compensation after Chavez ordered the  nationalization of the Cerro Negro oil project in 2007.

“I tell you now: we will not recognize any decision by  ICSID,” Chavez said during a televised speech. He has repeatedly  accused the U.S. oil major of using unfair deals in the past to  “rob” the South American OPEC member of its resources.

“They are immoral … How much could they steal in 50 years?  Who would dare launch this madness without any foundation? They  wanted $12 billion. From where, compadre?” he said.

“We are not going to bow before imperialism and its  tentacles, understand that … They are trying the impossible:  to get us to pay them. We are not going to pay them anything.”

An Exxon spokesman said the company had no comment.

Some interpreted the president’s remarks as  meaning Venezuela would reject rulings in any of about 20 other  cases that it faces before the World Bank’s tribunal, all  triggered by a wave of state takeovers in recent years.

They include separate multibillion-dollar proceedings  brought by another U.S. oil major, ConocoPhillips.

But two statements issued later, by Venezuela’s  Petroleum and Mining Ministry and by its state oil company  PDVSA, only referred to Chavez saying the nation would refuse to  recognize a verdict in the Exxon case.

Last week another arbitration panel, of the International  Chamber of Commerce, awarded Exxon $908 million in a separate  case relating to the Cerro Negro nationalization, turning  attention to the ongoing World Bank proceedings.

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On Saturday, Venezuelan Oil Minister Rafael Ramirez told  Reuters he did not expect a verdict in Exxon’s World Bank case  before the end of this year.

It is due to start being argued in February, Exxon says.

Both cases have been closely watched by the industry for  precedents in future disputes between companies and producing  states, which have increasingly sought a greater share of oil  revenue as prices soar and new reserves become tougher to find.

For years, Venezuela’s socialist leader has accused foreign  oil companies of plundering the nation’s reserves, but has also  maintained close ties with many of them.

Lawyers consulted by Reuters said the ICC decision only  covered a commercial dispute between Exxon and state oil company  PDVSA over earnings Exxon lost as a result of the takeover.

Exxon says the World Bank case is for compensation for its  assets, and experts say it could yield a larger award.

The government has insisted Exxon receive only slightly more  than the $750 million it said is invested in the project. Last  September, Venezuela offered to settle for $1 billion.

For years, Chavez has confronted oil companies with tax  hikes and contract changes aimed at increasing revenue from the  industry to fund state-led anti-poverty development programs.

Venezuela’s push to boost control over its oil industry has  been followed by similar efforts in other producing nations.  Critics say it has scared investors away from the South American  OPEC member and left crude production stagnant.

But some oil companies have remained eager to invest in  Venezuela’s Orinoco extra heavy oil belt, which is considered  one of the world’s largest mostly untapped reserves of crude.

U.S. major Chevron and Spain’s Repsol both  signed deals in 2010 for new multibillion-dollar projects there.