U.S. oil producer ConocoPhillips and PDVSA in Venezuela reached a settlement of more than $2 billion, the two companies said Monday, suspending a disagreement that blocked the oil company, which is state-run, from exporting oil from the majority of its important Caribbean facilities.
Over a decade ago the Conoco assets were nationalized in Venezuela and this case relates to that nationalization. In April a ruling that favored Conoco was released by an international court that ordered PDVSA to pay. However, no payment had been made, which led to Conoco seizing the majority of PDVSA’s assets in the Caribbean in an attempt to have its claim enforced.
The settlement reached means Conoco will end the legal enforcement if PDVSA begins making payments on a regular basis, said a Conoco spokesperson. The spokesperson did not say if payment would come in the form of crude or cash.
The agreement was confirmed by PDVSA through a statement, adding the deal shows once again the firm will PDVSA has to reach solutions with creditors.
The state owned and operated oil company also made progress related to other similar agreements with NuStar Energy LP and Exxon Mobil, both confirmed.
The crude production in Venezuela is a major revenue source but has fallen to a low of six decades in 2018 due to little or no investment, recession as well as hyperinflation that have pushed the country’s economy to the brink of collapse.
The settlement could help to restore part of the lost exports through resuming shipping out of the Caribbean
The International Chamber of Commerce was asked to resolve a dispute by Conoco on the early termination of several contracts with PDVSA. The ICC ruled in Conoco’s favor during April.
In a separate issue, Conoco brought a different claim to the World Bank court against Venezuela over two of its oil projects being nationalized. That case should have a final ruling before by the end of 2018, said Conoco.
Court hearings that were scheduled in Aruba and Bonaire next month could have helped Conoco to start selling the assets it seized from PDVSA through court attachments. At this time it is unclear whether that would go forward.
The government of Curacao, where there are efforts underway to replace PDVSA as the operators of the island’s refinery, welcomed the news.
PDVSA agreed it would make one initial $500 million payment within 90 days of the signing of the new accord, with the remainder being paid quarterly for a 4 ½-year period.