Receiver picked to seize Dragon Gas payments

THE Supreme Court has approved a receiver to go after US energy giant ConocoPhillips’ enforcement of a US$1.33 billion ($8.97 billion) claim against Venezuela's state-owned oil companies for past expropriations, including payments stemming from the Dragon gas deal.

On September 27, Justice Frank Seepersad appointed Anthony Pierre, of Moore Business Solutions TT, as interim receiver over Petróleos De Venezuela, SA (PDVSA) assets in TT. Pierre would be expected to provide periodic reports to the court on his progress.

According to the receivership order, these assets include “any compensation (or other monies) payable to PDVSA for relinquishing its right in respect of the Dragon Gas Field and for the infrastructure it owns; any right accrued to PDVSA to be paid consideration, now or in the future, by the TT government or any of its departments, the National Gas Company (NGC), and/or any of its subsidiary companies and/ or any of their respective bankers under any agreement for the supply and purchase of gas extracted from the Dragon Gas Field.”

ConocoPhillips’ application was filed on September 25, in the name of its two subsidiaries Phillips Petroleum Company Venezuela Ltd (PPCVL) and Phillips Petrozuata BV against PDVSA and its two subsidiaries Corpoguanipa SA and PDVSA Petroleo SA.

Seepersad said his decision was made as there is a risk that PDVSA will move assets from TT's jurisdiction to avoid paying ConocoPhillips.

The September 27 decision followed ConocoPhillips’ previous application for the enforcement and recognition of the Petrozuata arbitration judgment in TT.

On May 27, Seepersad 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. His order was varied to amend the method of delivery of service and the Venezuelan companies were given until July 17, to apply to set aside the order. However, that deadline passed with no attempt made by PDVSA and its two subsidiaries to do so.

In June, Energy Minister Stuart Young rubbished claims that the court’s recognition of the Petrozuata award would affect the 30-year-exploration and production license for the Dragon gas field.

He said the government secured a 30-year license for the Dragon gas field as well as a specific amended OFAC license from the US, to develop Dragon and produce and export gas from the field to TT. Venezuela and Trinidad, along with energy companies TT’s National Gas Company (NGC and Shell are looking to develop major offshore gas fields shared by the countries and on the Venezuelan side of the maritime border.

Young also referred to an announcement in late May that the Government was granted another OFAC license to develop the Manakin-Cocuina hydrocarbon field. That license is due to expire in May 2026.

Seepersad said the modality of payment under the OFAC licence was “sufficient to hold there are likely receivership assets which exist or can become due and owing and same can be possibly transferred out of the jurisdiction.”

ConocoPhillips’ lead attorney Andrew Stafford, KC, referred to Young’s statements, confirming PDVSA’s intention to relinquish ownership and operation of the Dragon gas field.

A 400-plus page affidavit from attorney Stephen Richard Dillon Hayes of the law firm of Kobre and Kim, Broad Street, London, noted that Shell and NGC committed to reimbursing PDVSA for its earlier investments at US$1billion, having previously insisted on a US$65 million signing bonus payment.

Hayes said while ConocoPhillips would not be entitled to payments to Venezuela, any sums owed to PDVSA associated with the license agreement were susceptible to enforcement action.

“Any sums due to PDVSA would not be shielded by a claim of sovereign immunity since those sums are not due to Venezuela as a sovereign entity,” Hayes said, referring to Young’s statements that the “same 30-year licence is not anywhere related to PDVSA. …there is something called the ‘corporate veil’. …the licence is with the Government of Venezuela, which is a sovereign entity.

“There is also a concept called ‘sovereign immunity’. So whilst you may have a decision against a commercial entity called PDVSA and payments with respect to PDVSA, that does not automatically equate to the Government of Venezuela. You cannot just simply pierce a corporate veil, Young said.

However, Hayes said, “As is put forward in the written submission of the claimants, any sums due to PDVSA would not be shielded by a claim of sovereign immunity since those sums are not due to Venezuela as a sovereign entity.”

Seepersad said any defence of state immunity, at the execution stage against assets of PDVSA, would be a difficult defence to mount.

He said from the minister’s statements and the other evidence provided by ConocoPhillips, there was likely to be “some type of monetary compensation” from the OPAC licence agreement.

“The modality of the payment of the OFAC licence is sufficient to hold there are likely to be receivership assets which can become due and owing and can be possibly transferred out of the jurisdiction,

He said if this was done, it would put it outside the reach of ConocoPhillips and the Supreme Court.

Seepersad noted that PDVSA did not have tangible assets in TT, apart from those identified stemming from the Dragon gas deal, and considered the difficulty for enforcement so the appointment of the receiver “would offer a level of practical protection.”

Hayes said it appeared that PDVSA has made claims to recoup its investment in the Dragon Gas Field which NGC and/or TT may be obligated to pay.

He also referred to the development of the Manakin-Coquina gas fields between bp, PDVSA, Venezuela, and NGC, Young’s statements on the negotiations an the award of an OFAC licence in July 2024 and the possibility of natural gas from Venezuela’s Loran gas fields.

However, for now, ConocoPhillips will not be seeking an order on the Manakin-Coquina and Loran gas fields projects until agreements are reached and made clear. If at that point, rights accrue to any of the defendants under those agreements, ConocoPhillips said it reserved the right for the preservation of those assets by the interim receiver.

Hayes said ConocoPhillips has applied for a special OFAC licence to take steps to execute against the receivership assets but its application is still pending.

Hayes also provided the court with extensive details on PDVSA’s “record of evasion,” which was referred to by the judge in his ruling. ConocoPhillips referred to past attempts to enforce international arbitral awards against Venezuela and its state-owned companies. However, it alleged, “Venezuela and those state-owned enterprises have taken drastic steps to try to place assets situated around the world out of the reach of creditors and to thwart execution, including resisting enforcement action in other countries on the Petrozuata award.”

Seepersad said he considered injunctive relief to prevent payments to PDVSA and the grant of a declaration of rights but decided against it as the State would have to be joined as a party to any such proceedings which would involve time and expense incurred by taxpayers.

“That is an unnecessary course having regard to the nature of the award registered in TT and the undeniable right the claimant has to enforce the award to ensure payment is received…The appointment of a receiver is a more viable option… in a dispute which is essentially a commercial dispute.”

The terms of the receivership order

The receivership order approved by the court not only extends to any compensation payable to PDVSA for the Dragon gas field but also any rights under other agreements for the supply of gas including the Manakin-Coquina and Loran gas fields without the receiver having to return to the court with a new application.

The order also gives the receiver the right to collect and take control of the receivership assets; and request information on those assets from third parties in TT, among others.

The receiver and his staff would be paid from the receivership assets up to a limit of US$50,000.

Like the previous order, PDVSA and its subsidiaries have the right to apply to have the receivership order set aside within seven days of service of the court’s order.

ConocoPhillips was also represented by TT attorneys Garvin Simmonette and Sophia Vailoo.

Background

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.

PDVSA paid ConocoPhillips about $700 million through a settlement agreement but ceased payments in late 2019, the court documents said.