Conoco Settles With Venezuela -- WSJ
August 21 2018 - 3:02AM
Dow Jones News
Both sides agree on payment plan for $2 billion arbitration
award to U.S. oil firm
By Kimberly Chin and Kejal Vyas
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 21, 2018).
ConocoPhillips will halt further legal actions against the
troubled state-run energy giant Petroleós de Venezuela SA over an
unpaid $2 billion arbitration award after both sides agreed on a
payment plan.
The Venezuelan company, known as PdVSA, agreed to make initial
payments of about $500 million within 90 days following the closing
of the settlement, and make quarterly payments over the next 4 1/2
years in compensation for two oil projects that Venezuela's leftist
government nationalized in 2007, ConocoPhillips said Monday.
But analysts who track Venezuela said they still questioned its
capacity to make the payments. Roiled by a punishing economic
crisis, the South American country has already defaulted on some $6
billion in debt and its lifeblood oil industry is seeing production
drop precipitously due to what critics say is underinvestment and
rampant corruption.
"This buys Venezuela time," said Russ Dallen, managing partner
at the investment bank Caracas Capital Markets. "But, of course,
they just may default on it again."
There was no immediate response from PdVSA or the Information
Ministry in Caracas, where government offices were closed Monday
for a holiday.
A tribunal representing the Paris-based International Chamber of
Commerce handed ConocoPhillips the $2 billion arbitration award in
April. A month later, a series of court orders permitted the
Houston company to seize Venezuela's oil assets on Dutch Caribbean
islands.
The orders resulted in severe operational hurdles for PdVSA,
forcing its oil tankers to avoid its refining and storage
facilities in the Caribbean, whose deep-sea ports it relies on to
load large Asia-bound ships -- especially those going to China,
which receives Venezuelan crude as debt repayment.
But by settling with ConocoPhillips, Venezuela could regain
access to those Caribbean facilities and clear up backlogs that had
hit its oil rigs. "As a result, we believe this settlement could
potentially slow the decline rate of Venezuela's oil production,"
analysts at ClearView Energy Partners said in a statement.
The International Energy Agency reported that Venezuelan oil
output at 1.2 million barrels a day in July, a 22% decline from
January.
ConocoPhillips, which also has a separate arbitration case
pending against Venezuela at a World Bank tribunal, is only one of
several creditors to have won large judgments against Caracas.
The rulings have set off a scramble for the country's remaining
foreign assets as its economy crumbles. President Nicolás Maduro
and his aides, meanwhile, are facing toughening U.S. sanctions over
alleged human-rights abuses and graft that has left the country
broke to pay for imports of food, medicines and other basics.
Last week, a Spokane, Wash.-based mining company called Gold
Reserve Inc. said it received an estimated $88.5 million in
government bonds instead of cash as partial payment for the $1
billion it is owed. The move has perplexed Venezuela watchers
because U.S. sanctions last year barred similar transactions using
bonds, whose value in debt markets has plummeted.
Others like Crystallex International Corp. are looking at
PdVSA's U.S.-based refining unit, Citgo. The defunct Canadian gold
mining company won a U.S. court ruling earlier this month allowing
it to seize Citgo, to satisfy its $1.4 billion arbitration award
for a nationalized mining project.
In addition to creditors' claims and Washington's sanctions,
PdVSA faces other legal and regulatory troubles in the U.S.
Multiple PdVSA executives have pleaded guilty or are charged in
a continuing U.S. criminal investigation into bribery allegations
at the company. Separately, in late July, prosecutors filed charges
in an alleged billion-dollar scheme to launder funds from PdVSA
using, among other things, real estate in Miami.
Court documents in that case say that former PdVSA officials
were among the alleged conspirators, and they joined money
managers, brokerage firms, banks and real-estate-investment firms
in the U.S. and elsewhere to operate "as a network of professional
money launderers."
Write to Kimberly Chin at kimberly.chin@wsj.com and Kejal Vyas
at kejal.vyas@wsj.com
(END) Dow Jones Newswires
August 21, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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