Exxon, Conoco Demand Compensation of
$32bn as Maduro Predecessor Chavez Nationalised Industry
Companies like Exxon Mobil and ConocoPhillips
say that Venezuela owes them billions of dollars for confiscating their assets two
decades ago.
Major US
and European oil companies say Venezuela owes them tens of billions of dollars
for assets confiscated during the nationalisation drive under former president
Hugo Chávez. Exxon Mobil and ConocoPhillips hold the largest claims, estimated
at about US$20 billion and US$12 billion respectively, stemming from forced
exits in the mid-2000s. While arbitration rulings have largely favoured the
companies, most awards remain unpaid, with Venezuela disputing the claims.
The issue
has regained prominence as President Donald Trump seeks to revive Venezuela’s
oil sector and expand US involvement following the capture of President Nicolás
Maduro. Companies remain wary of reinvesting until compensation disputes are
resolved, despite potential recoveries through mechanisms such as the auction
of Citgo. Analysts say unresolved claims, political instability and the high
cost of restoring production continue to deter investment, even as Washington
signals support for US oil firms’ interests.
Western
oil companies have been fighting to recoup tens of billions of dollars that they
say Venezuela owes them — debts that could play a prominent role in efforts by President
Trump to compel U.S. businesses to produce more oil in the country.
Exxon
Mobil and ConocoPhillips top the list of oil companies with big financial claims
against Venezuela, whose president, Nicolás Maduro, was captured by U.S. forces
over the weekend in Caracas.
American
and European oil companies once had significant operations in Venezuela, ranked
as having the world’s largest proven oil reserves. But most Western energy businesses
abandoned the country after disputes with its leftist government, and since then
corruption, mismanagement and neglect have greatly eroded oil production.
The
foreign oil companies have been fighting for two decades to be compensated for being
forced out of the country under Mr. Maduro’s predecessor, Hugo Chávez. Oil executives
and experts have said that until those debts are resolved these companies will be
very reluctant to invest more in the country — something Mr. Trump has made one
of his key aims for reviving Venezuela’s economy.
In
the mid-2000s, the Chávez government demanded that oil companies accept a smaller
stake in Venezuelan projects without compensation. Most foreign companies left the
country rather than accept the new terms.
Mr.
Trump on Saturday said he would defend the interests of U.S. oil companies, including
their claims against Venezuela. “We built Venezuela’s oil industry with American
talent, drive and skill, and the socialist regime stole it from us during those
previous administrations, and they stole it through force,” he said. He added that
the United States would “never allow foreign powers to rob our people.”
ConocoPhillips’s
claims against Venezuela add up to $12 billion, while Exxon Mobil, the largest U.S.
oil company, has said the country owes it an estimated $20 billion.
Chevron
is the only U.S. oil company that stayed in Venezuela. That gambit has put it in
a potential position to reap a significant reward as the Trump administration presses
the country to accept greater U.S. investment.
Exxon
Mobil, ConocoPhillips and other companies have spent years trying to make Venezuela
pay through international arbitration and cases in U.S. courts.
“It’s a stigmatizing action against a country,”
said Shon Hiatt, director of the Zage Business of Energy Initiative at the Marshall
School of Business at the University of Southern California. “It’s basically telling
everybody that they’re never going back in to the country.”
European
energy companies, including Italy’s Eni, France’s TotalEnergies and Spain’s Repsol,
also invested billions of dollars in Venezuela, though their operations were much
smaller than those of Exxon Mobil and ConocoPhillips, said Mr. Hiatt, who has long
tracked the oil industry in Venezuela.
While
oil companies have categorized those debts as unlikely to be repaid, they are highly
unlikely to give up on their claims.
ConocoPhillips
may end up recouping some of its losses as part of a U.S. Bankruptcy Court’s auction
of Citgo, an American subsidiary of Venezuela’s state-owned oil company, Petróleos
de Venezuela.
ConocoPhillips
declined to comment beyond what it has said in regulatory filings.
The
company had substantial investments in oil projects in central and eastern Venezuela
as well as off the country’s coast. International arbitration bodies have repeatedly
ruled in Conoco’s favor, but turning those decisions into
cash has been very difficult.
Exxon
Mobil has said in regulatory filings that it collected awards of $908 million related
to its investment in the Cerro Negro Project in eastern Venezuela, and $260 million
in compensation related to the La Ceiba Project on a port in the nation’s central
region.
But
another $1.4 billion arbitration award was annulled in the International Center for Settlement of Investment Disputes. Exxon filed a
new claim to restore the award, but that and the large majority of Exxon’s claims
have gone unpaid.
Exxon
Mobil did not respond to requests for comment.
Venezuela
has contested many foreign oil company claims, and said
it owes much less or nothing at all.
U.S.
and European oil companies have been speaking with the Trump administration about
their next steps in Venezuela. But new investments pose significant challenges because
of the political instability created by Mr. Maduro’s capture.
Trump
administration officials said on Wednesday that the U.S. government would take control
of sales of Venezuelan oil indefinitely under a deal being negotiated with the country.
Money from those sales will be used to “stabilize the economy in Venezuela,” the
U.S. energy secretary, Chris Wright, told C-SPAN. Only later would the revenue be
used to compensate U.S. oil companies for their claims against Venezuela, he said.
But
investors remain wary. So far this week, shares of Exxon Mobil and Chevron have
fallen more than 5 percent, while ConocoPhillips’s stock price has slipped more
than 7 percent.
Even
before the Trump administration seized Mr. Maduro, the cost of restoring Venezuela’s
oil production would have been substantial.
The
Inter-American Development Bank, the primary source of development financing in
South America and the Caribbean, estimated in 2020 that it would cost $10 billion
a year over a decade to restore Venezuela’s oil production.
The
Center for Energy Studies at the Rice University’s Baker
Institute for Public Policy estimated that Venezuela’s production peaked in 1998
at 3.4 million barrels of oil a day and dropped to 1.3 million barrels a day by
2018.
In
a 2020 report the center noted that the failure to attract
more investment into its oil industry has been “one of the key drivers of the economic
catastrophe facing the country.”