Court Reverses Exxon Freeze
on Venezuela Assets
LONDON—A British judge on Tuesday lifted a $12 billion freeze on Venezuelan assets awarded to Exxon Mobil, dealing a blow to the oil giant in its fight with the OPEC nation over President Hugo Chavez's nationalization crusade.
The ruling hands a victory to Chavez in the bare-knuckles dispute between the largest U.S. oil company and one of the world's most oil-rich countries that boosted energy market tensions and helped push oil prices to new records above $112.
"Our people won, our country won, our homeland won," said Energy Minister Rafael Ramirez in a press conference, after earlier describing the decision as a "100 percent" victory for Venezuela. "The judge's decision is a lesson to Exxon Mobil."
Venezuela and Exxon are in international arbitration over the 2007 takeover of an oil project Exxon once ran. The company wants at least $5 billion in compensation, but Venezuela insists the assets are worth less than $1 billion.
Venezuela's sovereign bond prices rallied almost 1.2 point in price on Tuesday's decision, recouping some losses from sell-offs earlier in the year. Exxon Mobil shares closed up 3.12 percent to $88.47 per share on the New York Stock Exchange.
The Texas company won the injunction orders in January after arguing state oil company PDVSA could sell off so many assets that it might be not be able to pay compensation in an eventual ruling over the Cerro Negro heavy oil project.
The judge discarded the measure and ordered Exxon to pay PDVSA's legal costs and compensation for some of the damages caused by the measure.
Market Tensions Even though Exxon said it had no plans to appeal the decision, analysts expect a continuing fight from the company—which is famous for heavy litigation in disputes.
"My guess is that Exxon isn't going to take this and simply say 'OK, we're going to sit down and come to a middle ground.' They're still going to play hardball," said James Halloran, analyst with National City Private Client Group, which owns 9.6 million Exxon shares.
Last month, a U.S. court confirmed its order freezing $300 million in Venezuelan assets in a U.S. bank.
Exxon had also secured $12 billion freezes on PDVSA assets from courts in the Netherlands and Dutch Antilles. The U.S. oil giant said the London ruling would not affect these orders, though Ramirez they would be have to be lifted.
Analysts say the two sides could negotiate a settlement in which PDVSA gives Exxon its share in the Chalmette refinery, a 50-50 joint venture between the two.
But Exxon and Venezuela are in dispute over oil supplies to the Louisiana-based facility. Ramirez on Tuesday said Chalmette, which usually receives most of its crude from the Cerro Negro project, is no longer being supplied by Venezuela.
The anti-U.S. Chavez, who ordered the take-over of Exxon assets as part of a 2007 drive toward a socialist society, called the measures "legal terrorism" sponsored by his enemies in Washington.
Venezuela responded to the measure by cutting commercial ties with Exxon and Chavez threatened to halt oil sales to the United States, which relies on Venezuela for some 12 percent of oil imports.
"Both companies will likely harden their positions, and continue to battle each other out in the courts over the next several years," said Patrick Esteruelas, an analyst with Eurasia Group in New York, in a statement.