Energy News

ConocoPhillips paid $345M by Venezuela over 2007 expropriation

The payment, from Venezuela's PDVSA, is expected to be followed-up with another payment of $155 million later this year.
By Renzo Pipoli   |   Updated Oct. 26, 2018 at 10:23 AM
Venezuela's former President Hugo Chavez in 2007 expropriated ConocoPhillip assets leading to a legal dispute. On Oct. 25, 2018 ConocoPhillips reported it received $345 million from Venezuelan state oil company PDVSA as the initial payment on a $2 billion settlement. File Photo by UPI

Oct. 25 (UPI) -- ConocoPhillips said Thursday it has received a $345 million payment from the Venezuelan state oil company PDVSA, part of a $500 million total payment agreed to be made within three months of an August accord.

The Houston-based company said it "recognized cash and commodities totaling $345 million in the quarter, with the remainder of the approximately $155 million in initial payments due in the fourth quarter."

In addition, it will pay $85 million within the next four and a half years until it covers the $2 billion settlement

"On April 25, 2018, the ICC tribunal awarded ConocoPhillips approximately $2 billion arising out of PDVSA's failure to uphold its contractual commitments," the company said in August when the settlement was awarded.

Venezuelan former President Hugo Chavez expropriated assets of ConocoPhillips in 2007 in the Hamaca and Petrozuata heavy crude oil projects.

ConocoPhillips claimed that in the early 1990s Venezuela created a fiscal framework that applied to these projects and that it developed the fields "with industry-leading technology and substantial long-term investment" but then in 2007 Venezuela expropriated the assets.

Venezuela was led for most of the 1990s by former President Rafael Caldera. In 1998 former president Hugo Chavez won the elections with 56 percent of the vote with a campaign denouncing corruption and promising to carry out anti-poverty efforts. Chavez died in 2013. The country is currently led by Nicolas Maduro, who was Chavez's vice president.

The payments come at a time that Venezuela is undergoing an economic crisis in large part due to decreased income from its main resource, oil production and exports. The country's output has steadily declined from well over three million barrels per day in the 1990s to about 1.4 million barrels per day in September.

With the reduced income, and political and social upheaval, the country is undergoing a severe crisis that has led to the migration of 2.3 million people, according to the United Nations.

ConocoPhillips ended the quarter with cash and cash-equivalents of $3.9 billion in addition to short-term investments for nearly another billion dollars for a total $4.8 billion.

As for its earnings, ConocoPhillips obtained $3.4 billion in the July-September period alone in cash as a result of its operating activities.

According to its website, the company produced about 1.4 million barrels of oil equivalent daily in 2017, with 5 billion barrels of oil equivalent in reserves.

Venezuela, which in September reportedly had a similar production of all of ConocoPhillips' operations average during the previous year, as of January had nearly 302 billion barrels of proved oil reserves, according to a preliminary EIA report. It is the country with the biggest reserves worldwide.

Venezuelan production problems result in large part by the decision of Chavez to fire about 40 percent of the company workforce because of a strike in 2002-2003. The company lost many trained personnel and executives at that time, and has not been able to recover previous production levels.

{i:A previous version of this story contained an incorrect figure for the amount of the payment this year.}

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