US energy giant to go after Venezuela's Dragon gas $$

THE HIGH COURT has recognised a US$1.1 billion arbitration award to a United States energy giant against the Venezuelan government for unlawfully expropriating its investments in Venezuela in 2007.

In an order on May 29, Justice Frank Seepersad allowed ConocoPhillips and its subsidiary Phillips Petroleum Company Venezuela Ltd to register the 2018 International Chamber of Commerce (ICC) final award against Venezuela’s state-owned oil company, Petróleos de Venezuela, SA (PDVSA), and two subsidiaries.

The award has been recognised in several other jurisdictions, including the UK, the US, Hong Kong, the Netherlands, Jamaica, Belize and Portugal.

Seepersad’s order allows CoconoPhillips to enforce the award and judgments for US$1.1 billion and post-award interest. He also gave orders for the service of the documents submitted by ConocoPhillips.

The application referred to other arbitration and enforcement actions in ConocoPhillips’ favour against the Venezuelan oil companies.

Supporting documents said ConocoPhillips intends to go after PDVSA for "relinquishing its rights in respect of the Dragon Gas Field and for the infrastructure it owns; and any consideration paid by the National Gas Company or Trinidad and Tobago to a PDVSA-related entity or Venezuela for ongoing supplies of gas."

On the Dragon Gas field project between Trinidad and Tobago and Venezuela, ConocoPhillips said it was aware of the project through media reports; the US Treasury Department’s Office of Foreign Assets Control sanctions and amendments to OFAC’s licences; providing its own timeline of the project, dating back to 2008 and which included the MOU signed with the TT Government in 2016 and the March 2017 US$100 million agreement to supply gas to NGC and Shell.

It also said ConocoPhillips wished to have the arbitral award recognised so it could enforce it as a judgment of the TT High Court against any compensation (or other monies) payable to PDVSA.

“Sources within Venezuela disclosed that Venezuela was ‘close’ to approving a licence for Shell and NGC to develop the Dragon Field and to export subsequent gas products to TT. “Negotiations were expected to take place in Venezuela at the end of November 2023.

“The terms proposed were said to provide a 25-year exploration and production license for the Dragon Field in favour of Shell and NGC, with Shell having a 70 per cent stake and operational control, and NGC holding the remaining 30 per cent.

“PDVSA would no longer have a stake in the project; instead, Venezuela would receive 'cash or a portion of gas production as royalties,'” supporting documents said.

The application further said ConocoPhillips “truly believes” there are assets belonging to PDVSA and the subsidiaries, “within the court’s jurisdiction which can be used to satisfy some or all of the award.

In the early 1990s, Venezuela created a new fiscal framework to induce foreign investment in its heavy oil projects in the Orinoco Belt and elsewhere.

ConocoPhillips helped Venezuela develop the Petrozuata, Hamaca and Corocoro projects by providing industry-leading technology and substantial long-term investments to the government of Venezuela.

However, in 2007, the Venezuelan government expropriated ConocoPhillips’ investments in their entirety without compensation, the company said in documents filed in support of its application to have the arbitral award recognised and registered in TT.

The documents filed in support said after the final award was issued, the parties entered into a confidential settlement agreement which allowed the Venezuelan oil companies to satisfy it in various ways, including making periodic payments to ConocoPhillips.

It said the ICC tribunal held that PDVSA and its subsidiaries were required to indemnify CoconoPhillips for the Petrozuata and Hamaca agreements and after the award, the Venezuelan companies “expressly and irrevocably” waived their right to challenge the award.

“The defendants also expressly consented to the recognition of the award in all the jurisdictions around the world where the claimants had commenced enforcement proceedings at the time of the settlement agreement, including the US and United Kingdom.

“The settlement agreement provided that as long as the defendants continued to satisfy their payment obligations, the claimants would suspend all legal action to enforce the award.”

However, the court documents said under the agreement CoconoPhillips would be entitled to fully enforce the award and the defendants were required to pay through quarterly payments until April 24, 2023.

“However, the defendants failed to make the required quarterly payments and otherwise perform their obligations under the settlement agreement.”

CoconoPhillips sent several notices of payments in default, but as of May 27, 2024, the company said all three defendants “continue to fail to comply with the award.

“Consequently, the total outstanding balance due to the claimants is US$1,326,937,851.”

This comprises US$1,103,936,231 excluding interest ordered under the award, which stands at US$223,001,619.

“The total outstanding balance due to the claimants arising out of the defendants’ default on their

obligations under the settlement agreement as of May 27, 2024, is US$1,790,373,981 accruing at the corresponding default interest.”

Seepersad’s order provided directions for service in several countries, including Venezuela, the US, France, and the UK, by hand and e-mail, as well as to the Venezuelan Embassy in TT.

According to the order, PDVSA and its subsidiaries, Corpoguanipa, SA and PDVSA Petróleo, SA, have seven days, from the date of service, to apply to have it set aside.

Providing affidavit evidence in support of the application was UK-based attorney Stephen Hayes of the firm Kobre and Kim. Attorney Sophia Vailloo of Ignatius Chambers applied on behalf of ConocoPhillips.