CARACAS – The Venezuelan government said that it was considering taking legal action against ConocoPhillips, after the United States oil company confirmed earlier this month that it was exercising an option to buy state oil corporation Petroleós de Venezuela (PDVSA) out of a jointly-owned refinery in Texas.
ConocoPhillips confirmed September 4 that it had decided to exercise an option to acquire PDVSA’s interest in the Sweeny refinery. At the time, reports said that ConocoPhillips had complained that PDVSA wasn’t supplying the specified crude oil, but there was no immediate response from the government in Caracas.
However, Venezuelan Energy and Oil Minister Rafael Ramírez broke the silence Tuesday in remarks to a group of reporters in which he expressed regret about resorting to legal action.
He said he regretted going to litigation, but PDVSA had to respond in kind after ConocoPhillips’ initiative.
The American company is reported to have notified PDVSA that it intended to acquire the 50 percent interest the state oil corporation owns in the refinery, which has installed capacity to process 70,000 barrels a day (b/d). ConocoPhillips holds the other half.
The refinery is not the only issue at stake between ConocoPhillips and PDVSA. The two are also in dispute over compensation for an erstwhile controlling interest held by ConocoPhillips in an oil field in the Orinoco Basin, colloquially known as the Faja.
ConocoPhillips has appealed to an international arbitration tribunal under the auspices of the World Bank. The original oil field contract included this provision in the event of a dispute arising between the partners.
There has also been talk in oil industry circles of ConocoPhillips taking its case to courts outside Venezuela. In this, it would be following the example of ExxonMobil, which is similarly at odds with PDVSA over a formerly controlling stake in an Orinoco oil field.
ExxonMobil first launched legal action in Britain, on the basis that PDVSA had interests in two refineries in the United Kingdom. However, a judge in London ruled that the case did not lie within British jurisdiction.
At the time, Ramírez hailed the ruling as a major blow in favour of PDVSA. However, ExxonMobil has another case pending in The Netherlands, and arguably most difficult of all for PDVSA, yet another before a court in New York.
In the wake of these disputes, the Chávez government is said to have excised the right to resort to international arbitration or foreign courts from new oil field contracts. From now on, officials say, all disputes will have to be resolved in Venezuelan courts.
Development of the Orinoco oil fields is seen as the key to Venezuela’s future as one of the biggest oil producers and exporters on the planet, and its ability to remain so for decades to come. It is not just the outlook for the future that’s at stake, but a degree of national pride as well.
At present, Venezuela’s proven reserves are put at 142.31 billion barrels of oil. Officials hope to raise this figure to 316 billion barrels, of which 235 billion would b
e in the Orinoco, placing Venezuela even above Saudi Arabia in the global oil reserves league.