Venezuela ordered to pay Exxon $1.6 billion for nationalization

Thu Oct 9, 2014 8:04pm EDT
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By Corina Pons and Alexandra Ulmer

CARACAS (Reuters) - A World Bank arbitration tribunal on Thursday ordered Venezuela to pay Exxon Mobil Corp about $1.6 billion to compensate for oil nationalization in 2007, though state oil company PDVSA expects to eventually pay closer to $1 billion.

Venezuela's socialist government hailed the long-awaited decision as a victory for its "sovereignty," given the U.S. multinational's hope for a much larger award in a compensation case typical of the sweeping nationalizations under the late Hugo Chavez's 14-year rule.

Still, the decision by the International Centre for Settlement of Investment Disputes' (ICSID) comes at a delicate time for cash-strapped Venezuela, already struggling with a sluggish economy, rampant inflation and looming bond payments.

Venezuela said it would pay the award, only after deducting a previous Exxon award from the Paris-based International Chamber of Commerce (ICC) of $908 million.

A source at state oil company PDVSA familiar with the case told Reuters that, factoring interest into the ICSID-ordered compensation, the final amount would be reduced to roughly $1 billion. PDVSA took over Exxon's operations under the nationalization.

"The award is a triumph, without doubt," said the source, adding PDVSA would pay as of November, after servicing its roughly $3 billion 2014 bond. The source asked not to be identified because he is not authorized to speak publicly.

Exxon also claimed the upper hand.

In a brief statement, the world's largest publicly traded oil company said the decision vindicated its view that Venezuela failed to compensate it fairly at the time. The company had been seeking roughly $10 billion in compensation.   Continued...

The Exxon corporate logo is pictured at a gas station in Arlington, Virginia January 31, 2012.  REUTERS/Jason Reed