China Petroleum & Chemical Corp., the state-controlled oil company, is suing Petroleos de Venezuela SA in U.S. courts for unpaid bills. Sinopec, as the Chinese company is known, also filed a request for arbitration against PDVSA at the International Chamber of Commerce, as it alleges damages of at least $23.7 million, according to court papers.
The development comes almost three months after PetroChina Company Ltd advised its U.S. unit to avoid any involvement in future loans to PDVSA.
The lawsuit further illustrates how the relationship between the two long-time partners is turning bitter after delays in paying past loans and oil quality issues. It’s also evidence that Beijing might not always be there to bail out Venezuela, as it has done over and over in the past decade, Russ Dallen, a managing partner at Caracas Capital Markets, a Venezuela-based investment bank, said in a note to clients.
The court documents give some insight on what partners such as Sinopec deal with to help cash-strapped PDVSA to operate.
Sinopec delivered 45,000 tons of steel products to PDVSA in 2013, and claims it got paid for just half of it. The Chinese company also said that PDVSA was late on making an advance payment for the materials, causing Sinopec to suffer damages, as the company was itself buying the steel products from a third-part supplier. The supplier, which was not named in the documents, eventually filed an arbitration case and was awarded $2.1 million.
“Defendants’ conduct constituted intentional misrepresentations, deceit, and concealment of material facts known to them, with the intention to deprive Sinopec of the payment it was owed,” the court documents show. “In order to coordinate their actions and to ensure that Sinopec did not become aware of their conspiracy to defraud it, defendants had to coordinate with one another on multiple occasions to discuss and plan their course of action.”
The case is 4:17-cv-03604, Sinopec USA, Inc. vs PDVSA Services BV, Petroleos de Venezuela SA and PDVSA Industrial, U.S. district court, Southern District of Texas, Houston division.