MIAMI, Sept. 25 (UPI) -- ExxonMobil is still seeking arbitration over its long-running dispute with Venezuela months after pulling out of the country in the wake of the nationalization of its oil and gas industries.
Though Exxon decided to pull up stakes in June, the U.S. petroleum giant is keen on being compensated for its multimillion-dollar investment in South America’s largest oil producer.
The company’s total investment in the Orinoco River reserve of Venezuela is said to be about $750 million. Exxon is reportedly seeking compensation totaling 41.7 percent.
However, company officials said they were “disappointed” with its ongoing struggle to get a fraction of its investment from Venezuela’s state-run petroleum firm Petroleos de Venezuela SA, or PDVSA.
“ExxonMobil has worked with the Venezuelan government to reach an agreement regarding compensation based on the fair market value of the assets,” company spokesman Len D'Eramo told United Press International Tuesday via e-mail.
We are disappointed these discussions have not been successful,” he added, saying the failure to reach agreement prompted Exxon to seek the assistance of the International Center for Settlement of Investment Disputes earlier this month.
The ICSID is a branch of the World Bank founded in 1966 “specially designed to facilitate the settlement of investment disputes between governments and foreign investors,” according to its doctrine.
However, the role of the center regarding private sector grievance following a fundamental change of policy that the one Venezuelan President Hugo Chavez instituted in May appears limited, said experts.
On May 1 PDVSA assumed majority control of the Orinoco River oil reserve at an added value to state coffers of $800 million, Chavez said last month.
The extra revenue will go toward social programs for poor Venezuelans, the leftist leader said at the time, as well as for education and defense.
Both ConocoPhillips and ExxonMobil Corp. announced in July they were pulling out of Venezuela despite spending millions of dollars in development over the last few years.
"They won't be missed," Chavez said of the companies.
Their pullout followed a protracted tussle between PDVSA and private foreign companies after Chavez announced Venezuela would acquire a majority stake in every operation in the Orinoco. While most companies acquiesced, Conoco and Exxon would not come to terms with PDVSA.
Exxon’s chances of salvaging even a fraction of its investment in Venezuela after its pullout appear slim to none since they are going it alone while most every other company bowed to the wishes of PDVSA, noted Michael Shifter, vice president at the Inter-American Dialogue in Washington.
Venezuela demands a majority stake in every project in the Orinoco and elsewhere as part of its effort to wrest greater control of the country’s natural resources from foreign investors.
“I don’t think it’s going to produce a lot of results … especially since they are on their own (in their grievance against PDVSA),” Shifter told UPI.
Their case is undermined to the extent that the others (foreign oil firms) seem to be making money and doing well,” he added.
Some speculate that the nationalization of Venezuelan oil has hurt the country more than it has helped.
Luis Vierma, exploration and production vice president at PDVSA, said in July that Venezuelan oil faces a "significant operational emergency" if it does not increase the number of rigs operating in the country and that the state firm fell short of its 2007 goal of getting 191 rigs online in 2007 and producing some 3.3 million barrels per day. So far, he said, 112 rigs were online as of July, and by the end of the year the number would only likely increase to 120.
"Venezuela is moving toward technological independence, but it will take a long time," Vierma said.
PDVSA's independence could take even longer considering Venezuela's oil output is believed to have slipped by more than 250,000 bpd from a year ago, according to the Paris-based International Energy Agency. Production has reportedly decreased from 2.6 million bpd to 2.37 million bpd.