Since Venezuela’s state-owned oil company, PdVSA (Petróleos de Venezuela, S.A.) owns the Citgo refineries in the USA, the companies that had lost billions of dollars of assets should target these refineries for seizure as compensation.
Citgo has three major refining complexes in the USA. with a total refining capacity of 750,000 barrels per day. Recognizing the vulnerability from asset seizure, PdVSA tried to sell these assets in 2014, and valued them at $10 billion.
That value may be grossly overstated, considering that Venezuela subsequently pledged 49.9% of Citgo to Russian oil giant Rosneft as collateral for a $1.5 billion loan.
In recent years, PdVSA has lost a series of arbitration awards related to expropriations, and companies have been looking for opportunities to collect, following Venezuela’s expropriation of billions of dollars of assets from U.S. companies like ExxonMobil and ConocoPhillips.
These refineries have the same vulnerabilities as the U.S. assets in Venezuela that were seized. They represent infrastructure on the ground that can’t be removed from the country.
In May, ConocoPhillips seized some PdVSA assets in the Caribbean to partially enforce a $2 billion arbitration award for Venezuela’s 2007 expropriation. ConocoPhillips had sought up to $22 billion — the largest claim against PdVSA — for the broken contracts from its Hamaca and Petrozuata oil projects.
The company (CP) is pursuing a separate arbitration case against Venezuela before the World Bank’s International Center for Settlement of Investment Disputes (ICSID). The ICSID has already declared Venezuela’s takeover unlawful, opening the way for another multi-billion dollar settlement award.
Last week, a court ruling has opened the door for Citgo assets to be seized to pay for these judgments. This ruling is sure to set off a feeding frenzy among those that have won arbitration rulings against Venezuela.
Defunct Canadian gold miner Crystallex had been awarded a $1.4 billion judgment over Venezuela’s 2008 nationalization of a Crystallex gold mining operation in the country. A U.S. federal judge ruled that a creditor could seize Citgo’s assets to enforce this award.
Oil Price.com / ABC Flash Point Oil News 2018.