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Editorial Commentary
VenEcconomy :
PDVSA’s wings beginning to be clipped
Chávez’s Government is very quick to toot its own horn and sell, no matter how insignificant, the victory to the population as if the had just won the battle to end all wars.
The latest of these glorious feats to be fed to the population has to do with the British Superior Court’s overturning of the judicial order to freeze up to $12 billion of PDVSA’s foreign assets until the dispute with ExxonMobil regarding the illegal “migration” of its Cerro Negro facility in the Orinoco Oil Belt is resolved.
In fact, the British Superior Court’s decision didn’t surprise anyone and PDVSA’s “victory” is really no big deal and more tactical than anything else.
On the one hand, the British Court decided that it was not competent to decide over the ExxonMobil vs PDVSA case, and so sentenced. On the other hand, it was going to be all up hill for ExxonMobil to prove the urgency of the matter and risk that PDVSA , a company with more than $56 billion in assets, could use legal tactics and maneuvers to separate itself from or hide all its assets in order not to pay the U.S. based oil company.
In VenEconomy’s opinion, the British Court’s decision has left matters pretty much the way they were and there is still a long road ahead for PDVSA.
First, the order to freeze PDVSA’s assets issued in Holland and the Dutch Antilles are still in effect. It’s worth pointing out that besides the assets PDVSA has in the United States, the main bulk of its assets are in precisely these two countries, subject to Dutch laws.
Second, PDVSA still has an order to freeze $315 million in assets pending in New York.
Third, and what in VenEconomy’s opinion carried the most weight regarding the decision handed down by the British Court, was that it clearly classified the “migration” order of Cerro Negro from a strategic association to a mixed company as an expropriation that requires adequate and just compensation for ExxonMobil.
Fourth, and even more important, the international arbitrage process is still ongoing, and it’s in PDVSA’s best interest that the dispute with ExxonMobil be resolved by both parties reaching an agreement as quickly as possible. The fact that this dispute is still not resolved and the pending dispute it has with ConocoPhilips, constitute an important barrier when it comes to foreign companies investing in Venezuela in order to help develop the country.
But, the sad truth of the matter is that PDVSA is taking advantage of all this legal mess to distract people’s attention from the real critical issue: that the goose that laid the golden egg is in serious bad shape and agonizing.
What’s more, the arrogance that is so characteristic of Chávez’s Government doesn’t allow it to consider that other than ExxonMobil and ConocoPhilips, it’s only the other big international oil companies like Chevron, Shell, and Total that are the only ones with the technology and the finances to build and operate deep conversion refineries necessary for developing the Orinoco Oil Belt. And, unfortunately for PDVSA, they all operate under the same ethical and legal regulations that ExxonMobil does.
VenEconomy is a Venezuela's leading specialized publisher in the economic and financial area. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.
Editor's Note: This commentary was originally published by VenEconomy, on 03/24/2007. Petroleumworld reprint this article in the interest of our readers.
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Petroleumworld News 03/26/08
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