ConocoPhillips' $1.3b claim against PDVSA stands

THERE has been no attempt so far by Venezuela’s state-owned oil company, Petróleos de Venezuela, SA (PDVSA), and two subsidiaries to set aside US energy giant ConocoPhillips right to enforce a US$1.33 billion ($8.97 billion) claim against Venezuela for past expropriations.

The new deadline for the Venezuelans was July 17. Since no application has been filed, this means the High Court’s order on May 27 remains in effect and the ConocoPhillips arbitration judgment is duly registered and recognised in TT.

On June 25, Justice Frank Seepersad varied his original order so that ConocoPhillips could serve the court’s decision in English and in Spanish.

The revision of the judge’s order came after he was told the enforcement proceedings were not served because of the time it was taking to translate the more than 1,000 pages of documents. Seepersad’s order in May gave ConocoPhillips the green light to enforce its US$1.33 billion arbitration award in Trinidad if it could establish there were assets held by the Venezuelans or money owed to them (PDVSA) by entities in TT.

The decision gave the US oil company the right to seize any compensation to Venezuela from joint gas projects with Trinidad.

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 TT to a PDVSA-related entity or Venezuela for ongoing supplies of gas.”

The judge’s order also gave the Venezuelan state companies seven days after they were served to challenge it and have it discharged.

The sitting on June 25 was convened by the judge, who expressed concern that the court’s order was not served on PDVSA and its subsidiaries.

Seepersad said when he issued the exparte order, he did so considering that a successful litigant was entitled to the spoils of their judgment while noting that neither the cause of action nor the arbitration award took place in TT.

“The court also took judicial notice of the fact that the registration of the judgment debt in this jurisdiction had the potential to impact upon the ongoing energy partnership discussions between this Republic and the Bolivarian Republic of Venezuela relative to the Dragon gas project,” he said.

“The freedom to contract also imposes an obligation to exercise due diligence and to ascertain the bona fides of proposed contracting parties.

“On the face of the claimant’s application, there appeared to be no operative circumstance which prevented the registration of the award in this jurisdiction but natural justice mandates that the other side should be afforded an opportunity to be heard.

“This court will, however, not condone any abuse of its process nor will it tolerate its issued order being held over the head of the defendants like the sword of Damocles.”

Seepersad warned if the defendants were not served in the identified time period, the court would be inclined to discharge its order.

In its application, ConocoPhillips said it “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 arbitration award has been registered in other countries.

Seepersad’s original 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.

ConocoPhillips was represented by Garvin Simonette and Sophia Vailloo, who would be joined by UK attorney Andrew Stafford SC and Merrick Watson of the British Virgin Islands.