Arbitration Ruling on Exxon/Venezuela Dispute Finally Coming
Monday, October, 13, 2014
A multi-billion dollar claim against Venezuela on the part of the Exxon Mobil Corporation will finally be rendered this month after more than seven years, according to a notification sent out by The World Bank arbitration tribunal.
The dispute centers on Venezuela’s decision to nationalize two large oil projects that Exxon Mobil had invested in: the Cerro Negro and La Ceiba oil projects. Exxon has already received $908 million from Venezuela’s nationalized oil company PDVSA under a decision rendered by the International Chamber of Commerce. While estimates of the World Bank’s decision go as high as $1 billion paid to Exxon, it is possible the arbitration panel will deduct this previous fine from their award.
The Exxon Mobil case is only one of nearly two dozen international lawsuits stemming from its wave of nationalizations initiated by late Venezuelan President Hugo Chavez. Despite having rich oil reserves, Venezuela has been accused of gross mismanagement, with the government using oil revenues it controlled after the nationalizations as a “piggy bank” with which to fund splashy social programs and other purchases instead of making serious infrastructure investments. The mounting fines from international arbitrators combined with sinking oil production have already hurt Venezuela’s economy and seem likely to hurt it further; oil production in the country declined from 2.9 million barrels a year in 2013 to 2.45 million barrels this year. This decline has been ongoing and is blamed in part on incompetence and a lack of development in the oil fields the government seized in 2007.