U.S. energy corporation ConocoPhillips has signed a USD 2 billion settlement agreement with PDVSA, Venezuelan state-owned oil company.
The deal relates to PDVSA’s failure to meet contractual obligations as indicated by an arbitral tribunal in April 2018, constituted under the rules of the International Chamber of Commerce (ICC).
The Venezuelan company agreed to pay USD 500 million within a period of 90 days from the time of signing, while the rest of the amount would be paid quarterly over a period of 4.5 years.
“As a result of the settlement, ConocoPhillips has agreed to suspend its legal enforcement actions of the ICC award, including in the Dutch Caribbean,” the company said.
“The award relates to the unlawful expropriation of ConocoPhillips’ investments in the Hamaca and Petrozuata heavy crude oil projects in Venezuela in 2007 and other pre-expropriation fiscal measures.”
This move is believed to be good news for tankers as PDVSA is now expected to resume exporting oil from most of its key Caribbean facilities and boost Venezuelan crude production, which has been on a major decline over the recent period amid economic crisis in the country.
The Venezuelan economy is almost entirely dependent on revenue generated from the oil and gas industry.
The country is in a desperate need of investment into its oil and gas industry, but the current political impasse with the U.S. and the currency crisis in the country are making it difficult to attract investors.
ConocoPhillips has a separate and independent legal action pending against the government of Venezuela before a tribunal under the auspices of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).
As indicated by Conoco, the ICSID tribunal has already ruled that Venezuela’s expropriation of ConocoPhillips’ investments violated international law, and proceedings are underway to determine the amount of compensation owed to ConocoPhillips.