Venezuela ready to pay Exxon only $1bn

Venezuela will pay ExxonMobil $1bn in compensation for assets nationalised in 2007, far less than the $6bn the world’s biggest oil company by market capitalisation is seeking through international arbitration, according to government officials.

Rafael Ramírez, energy minister, also cast doubt on whether Venezuela would respect rulings issued by international courts, with decisions expected this year in New York’s International Chamber of Commerce and the World Bank’s International Centre for Settlement of Investment Disputes.

He was referring to Exxon’s demands for compensation after President Hugo Chávez ordered the seizure of several extra-heavy crude projects in the Orinoco Belt, where the recent certification of vast oil deposits led Opec to rank Venezuela as holding the largest oil reserves in the world.

According to statements to Reuters, Mr Ramirez is proposing to pay $1bn for Exxon’s assets. He underlined that PDVSA, the state oil company, was not negotiating with the US oil company outside New York’s International Chamber of Commerce, which is expected to issue a ruling on the case soon.

ExxonMobil declined to comment.

Venezuela is facing about 20 international arbitration cases after a wave of nationalisations across “strategic” sectors of the economy, including energy, metals, cement, food and utilities.

The Opec nation could be asked to pay out as much as $40bn. That would place heavy strain on public finances as Mr Chávez, who has just completed his fourth round of chemotherapy in Cuba, begins campaigning for presidential elections due in October 2012.

Mr Ramirez, who is also president of PDVSA, appeared to contradict statements earlier on Wednesday by Carlos Escarrá, Venezuela’s prosecutor-general, suggesting that Venezuela would accept decisions arising from international arbitration.

“They were asking for $20bn,” said Mr Escarra, referring to Exxon’s original demands. “Suddenly that dropped to around $12bn, and now – imagine what bandits – they want $6bn. Venezuela has to pay for the expropriations, we are clear on that … The problem now is how much we will pay.”

Earlier this year, Mr Ramirez said PDVSA had made an allowance of $2.5bn to cover the arbitration payments due to Exxon and ConocoPhillips, whose assets were taken over at the same time but are thought to be worth around twice as much as Exxon’s.

“We are concerned about the reaction by the authorities if the compensation amounts finally awarded to both oil companies are much higher than what they have presented as ‘maximum’ figures to be paid by the republic,” Boris Segura, an analyst at Nomura Securities, said.

“Coupled with the recent announcement of the repatriation of gold holdings and the move of international reserves out of the US and Europe, this confusion about the arbitration claims does not look positive for Venezuela’s willingness to pay,” said Mr Segura, referring to Venezuela’s debt