MercoPress. South Atlantic News Agency
Victory for Chavez in arbitration with Exxon Mobil over assets’ nationalization
An international arbitration panel has awarded US oil giant Exxon Mobil Corp 908 million dollars in compensation for Venezuela's 2007 nationalization of assets, less than 10% of what it sought in a dispute that pitted a top global oil company against one of the world's largest oil exporters. Read full article
Comments
Disclaimer & comment rulesExxon loses while it's says it wins.Yes of course they won didn't they.They donated the 9bn to the people of Venezuela.Really?
Jan 02nd, 2012 - 01:07 pm - Link - Report abuse 0Five years back, ExxonMobil Corp assessed its net investment in the Cerro Negro, Orinoco field - which it was forced to leave through Chavez’s nationalization - at $750 million (less than 1% of the Corp’s worldwide assets).
Jan 02nd, 2012 - 06:26 pm - Link - Report abuse 0ExxonMobil Corp. sought ICC arbitration in 2007 seeking $10 billion compensation.
This week’s ICC judgement said that the Venezuela's state oil company, PDVSA – who took over the oil field - has a contractual liability to ExxonMobil Corp., and they awarded $908 million.
This is *small beer* compensation, and it opens the way to easy expropriation by governments of oil/gas extraction enterprises anywhere in the world. It costs the Corp's losses at 'standing assets and commitment', discounting all future profits projected from operations within the field.
This is unacceptible.
And, at the very least, I guess the massive new insurances against state expropriations will transfer costs right up the line to the end consumers.
Obviously Geoff you are speaking from the point of view of the corporation.From the point of view of Venezuela there is a different monologue.You're not speaking about justice surely?
Jan 02nd, 2012 - 10:01 pm - Link - Report abuse 0No, Yul, not justice. More like ethics.
Jan 03rd, 2012 - 12:08 pm - Link - Report abuse 0Ethics is the glue that sticks together transactions between people(s), between states and between companies.
In this case the business deal struck between the government and its agent PDVSA with the foreign oil company was also stuck together with the glue of the contract and its 'fine print'.
The contract was torn up by one party and the judgement for compensation to the other party only recognised the point-in-time disbursements as subject to repayment (the chances of repayment are, of course, minimal).
The failure to recognise the worth of the contract over the extraction period (lifetime value of the contract) is incredible.
Perhaps this is the lack of justice about which you speak.
What is the Venezuelan monologue? . . . .
That it 'got it wrong' and didn't really mean to operate the oil field with the aid of a foreign corporation?
That it felt the need to re-negotiate the contract for social reasons, but found simply stealing the foreign assets and economic worth the easier option?
Yul,
this contract wasn't signed by Venezuela, it was signed by the Government.
My distaste is for
(i) the Government's motives - arguably, needing money to pump-prime Chavez's re-election campaign, and to subsequently run his regime, and
(ii) the damage it does to the worth of agreements and contracts arrived at *in good faith* between governments and corporations.
If USA did not interfere in the internal affairs of countries,seeking to support the party which represents their interests,and that the contract was between equal parties,you would have a case.
Jan 03rd, 2012 - 05:04 pm - Link - Report abuse 0China funded O'Bhama's campaign and their demand for raw material is now presenting an alternative to yanqui corporations.Do you not think they have had a longer enough period of ascendency.China knows from experience what these organisations can do in a country.
No Geoff,you are focussing on legal ethics,and you know that unequal partners do not have ethical contracts, only legal contracts.The balance of power is moving.Not to say it will be smooth and relentless.
Yul,
Jan 03rd, 2012 - 07:43 pm - Link - Report abuse 0you seem to be saying that the days of legally binding contracts are over.
Ethics and the law are the only protections for unequal (or equal) partners in business; it's not just us 'neo-liberals' that believe this - ask the Chinese whether they believe in the sanctity of a contract.
Without resorting to the old contract joke - marriage - give me a business model that subscribes to your understanding of non-ethical contracts.
@Yuleno
Jan 03rd, 2012 - 08:00 pm - Link - Report abuse 0Geoff genuinely believes big corporations have feelings that we shouldn't hurt even when this is in the name of national interest.
As for the arbitrarion, what are the chances that its decision was biased against Exxon? On account of his politics and rhetoric, Chávez isn't really a prestigious or widely respected leader, and Exxon, due to its influence on world markets, doesn't lack political clout. Still, the arbitration took a path that most have described as favourable to Chávez. Having in mind all of the above, what are the odds that Exxon was unfairly shortchanged?
Forgetit87
Jan 03rd, 2012 - 09:28 pm - Link - Report abuse 0You are right it would seem that the decision appears to be biased and as can be seen from today's article,exxon are going to another body which almost certainly will be biased in the opposite direction.But as for corporations having feelings,I didn't see any in the exxon valdez matter.In fact,they created the opening for the yanqui to further erode the way of life of another people.
As for the days of contracts Geoff,they are not over but the exploitation of states weakened by interference from outside,through such contracts is hopefully less likely.And that at a time when candidates for U S presidency talk about individual freedom.
I don't think this arbitration was biased, I was saying the opposite - that on account of Chávez's relative international isolation and Exxon's deep pockets - which surely translate into political clout - there's no real reason to expect an accredited international body to make a biased decision in Chávez's favour.
Jan 03rd, 2012 - 11:06 pm - Link - Report abuse 0And Geoff, I'd like to remind you that Venezuela is a sovereign nation. It can choose how open it will be to foreign capital. It's funny that you often play the nationalist whenever there are reports of Chinese capital acquiring strategic assets in South America, but your attitude is quite another when it comes to Western 'investment'.
Of course the arbitration was one-sided. Why? I don't yet know, but it will come out in the next stage.
Jan 04th, 2012 - 12:20 am - Link - Report abuse 0Perhaps it is because future profits are based on extraction modelling and spot market prices which cannot be accurately projected. And perhaps because the compensations might potentially be so vast. But breaking a contract comes with some penalty - but not in this case, apparently.
I think we can now expect the Iraqi government to nationalise all oil reserves within the national boundaries - not what the US wants or expects, but it is the logical green-light outcome of this arbitration. Also, and for instance, Brasil will be well placed to nationalise all Chevron assets within its EEZ, and this escalates to the US expropriating BP's assets within its own EEZ, et seq.
You see how the breakdown of contract law takes on a life of its own and creates wild-fire business anarchy.
Don't say it cannot happen; we are seeing the world struggling with the imminent collapse of supposedly robust banking systems.
There is much more to be said, but it can wait until you both understand each others arguments; at the moment your arguments are being mutually wrongly understood, perhaps because you are not yet clear about your own positions.
I don't think I disagree with forgetit's observation.I just didn't understand that some on this forum could see anything positive coming from Venezuela.
Jan 04th, 2012 - 09:58 am - Link - Report abuse 0You are a prophet of doom though Geoff.Your model of what is possible in the future is similar to a sulking child's response to being corrected.
In my view,this decision is suprising for the very fact that it is neutral in a world where for Chavez to win anything in the “1st world”,is unusual.Who knows what other expropriations Bolivia can achieve successfully.Iraq is exactly the case of where contracts will be unfairly agreed.Unequal partners!
“Of course the arbitration was one-sided. Why? I don't yet know, but it will come out in the next stage.”
Jan 04th, 2012 - 01:19 pm - Link - Report abuse 0Just as, even before being informed of all of its details, you took Chevron's side in the oil spill affair - you did that before knowing how lazy was Chevron's assessment of the well it was working on and how lackadaisical was its response to the spill. You love big Western corporations - you don't think they should ever be thought of as responsible for disasters prompted by their own technical flaws, and you think that in arbitrations such as this the point of view of the big corporation should always be the one to prevail: and this, again, whilst you admit to not being informed of all of the factors that weighed on the arbitration's decision. You're what some call a corporate whore. I like to believe that's more b/c of your inner misguided beliefs than corruption. :)
Of course the arbitration was one-sided.
Jan 04th, 2012 - 01:50 pm - Link - Report abuse 0Why?
Because future profits are based on extraction modelling and spot market prices which cannot be accurately projected?
Because the compensations might potentially be so vast?
And why does breaking the contract comes with no penalty?
Anybody have any serious suggestions?
1 - “future profits are based on extraction modelling and spot market prices which cannot be accurately projected”
Jan 04th, 2012 - 02:45 pm - Link - Report abuse 0Then who are you to say that the proposed compensation is insufficient and the decision is biased against Exxon?
2 - “Because the compensations might potentially be so vast?”
This directly contradicts your first point. We don't know how much Exxon's assets cost or would be worth in the future, do we?
3 - “why does breaking the contract comes with no penalty?”
$1 bn in fines isn't a penalty?
Geoff you are on a loser here
Jan 04th, 2012 - 06:03 pm - Link - Report abuse 0Chevron oil spill-this after BP and it's attempts to wriggle out of it's culpability and try to shift it to a contractor.(a lesson there for ways to manage risk in the future).Any oil spill should be viewed from it's impact rather than the loss.
Exxon is a big enough organisation,with a structure to compliment that,to take care of it's self.How you can base the compensation on what is basically imaginary projections is beyond my comprehension.Furthermore,the politics of oil is littered with'dirty tricks' that it's resort to the world bank and it's conclusion is to be eagerly awaited,I think.
As for big corps winning arbitration,that is usually the case,but that doesn't mean claims which are deterrence to the whole idea of reclaiming a state assets,should succeed.In fact,that is what's so refreshing about this decision.
As for other models of 'doing business'!!,there are such in Asia besides other 'western models' eg cooperative.We are not chained to capitalism,it is only one which might now have served it's purpose.
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