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ConocoPhillips moves to take key Venezuelan oil operations

Published:Monday | May 7, 2018 | 12:00 AM
A Conoco service station in Glenrock, Wyoming.

United States oil giant ConocoPhillips is pressing for control of Venezuela's key offshore operations in the Caribbean, seeking to recoup US$2 billion from a decade-old dispute with the nation struggling to feed its people, a source confirmed Monday.

The Houston-based Conoco-Phillips is asking a court in the Dutch Antilles for control of facilities that Venezuela's state-run oil firm PDVSA operates, a person familiar with the claim confirmed to The Associated Press. The person was not authorised to discuss the legal action.

PDVSA relies heavily on the facilities on the islands of Curacao, Bonaire and St Eustatius used to refine and store Venezuela's heavy crude before shipment to the United States, China and India, three major global markets.

Dozens of ships that transport oil pumped from Venezuela sat idle Monday docked in the country's ports, according to an online vessel-tracking website.

Venezuela holds the world's largest underground oil reserves but production has declined under nearly two decades of socialist leadership, casting the once-wealthy nation deep into political and economic crisis.

An arbitration panel under the International Chamber of Commerce in late April found that Venezuela under the leadership of then-President Hugo Chavez in 2007 had illegally expropriated joint venture operations with ConocoPhillips.

The firm turned to a local court to collect the award, but the petition spelling out its demands has not been made public. The US$2 billion award represents the equivalent of more than 20 per cent of the cash-strapped government's foreign currency reserves.

"We will pursue all available legal avenues to obtain full and fair compensation for our expropriated investments in Venezuela," ConocoPhillips said in a statement.

Officials at NuStar Energy, a San Antonio-based firm that leases PDVSA a facility on St Eustatius, were aware of the order against PDVSA, said company spokesman Chris Cho, adding that the company was evaluating its legal and commercial options.

PDVSA leases facilities on two of the islands, so ConocoPhillips cannot take them over even with a court order, but it could seize Venezuela's oil stored in them and any state-owned ships that dock there, said Russ Dallen, a Venezuela expert.

Oil tankers leaving Venezuela's shores over the weekend turned around before reaching the Caribbean islands, the tracking website showed.

Two of the island storage facilities have the capacity to hold crude valued at US$900 million, about half of Venezuela's monthly production, Dallen said.

"It's a devastating blow to a beleaguered country that can't even feed its population," said Dallen, adding that Venezuela owes billions to investors around the world. "We're going to see a lot more of these in the future."