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PDVSA says Exxon's asset freeze based on fantasy
LONDON
Petroleumworld.com, Mar 03, 2008
Venezuelan state oil firm PDVSA told a UK court on Friday that a $12 billion freeze on its assets should not have been granted to Exxon Mobil (XOM.N: Quote, Profile, Research) as the oil major's arguments were "sheer fantasy land."PDVSA lawyer Gordon Pollock said the amount frozen was excessive. He said a claim that PDVSA would try to hide its assets was not credible and the English court which awarded the freeze had exceeded its jurisdiction.
Pollock said the $12 billion figure Exxon asked to be frozen was based on adding up all the projected cash flows of the Venezuelan heavy oil project seized by President Hugo Chavez as part of his nationalization drive, without any discount made for the fact they run to 2035.
He said this argument was "simply economically and financially illiterate."
"There's only one way to describe that argument and that's 'weird'."
He said any amount Exxon could claim legitimately was "an absolute tadpole" compared to the $12 billion which the U.S. major oil company managed to have frozen so that compensation could be secured if it won arbitration over its lost oil fields.
He said the U.S. company justified the need for the freeze by alleging bad faith on the part of the Venezuelan government and by claiming state oil company PDVSA could rapidly sell its refineries and pipelines around the world and stash the cash away from Exxon's grasp.
"This is sheer fantasy land," he said. "Refineries don't get up in the middle of the night and sneak away across the border."
Pollock said Exxon was asking the court to treat PDVSA as "evil people" who would seek to put their assets beyond reach in case arbitration should rule against it.
Exxon, however disputes PDVSA's claims. The company says that when it returned to Venezuela in the 1990s, they signed a deal with PDVSA that provided not only for compensation if Exxon was forced out of the country, but also "prompt partial compensation while proceedings were held concerning further compensation."
"PDVSA has reneged on its contractual commitments," said Exxon spokesman Alan Jeffers. "PDVSA is now trying to put its assets in places where Exxon Mobil will have difficulty reaching them when an arbitration award is made. The UK has a remedy to prevent what is happening, and we are using it."
JUDGMENT
Still, Pollock repeated that a UK court should not have awarded Exxon the freeze because the dispute and parties involved were unconnected to Britain.
"They come here as forum-shopping tourists," he said.
President Chavez told foreign oil companies last year to cede a majority stake in oil projects or leave the country.
Most agreed and accepted bids for stakes in their projects from state oil company PDVSA that analysts said were below market value. Exxon opted to pull out rather than concede and has applied for international arbitration to win damages.
Pending the outcome, Exxon, the world's largest fully publicly quoted oil company by market value, has convinced courts in Britain, the United States and the Netherlands to freeze Venezuelan assets.
Venezuela's oil minister Rafael Ramirez described Exxon's move as "legal terrorism" and said the seized oil project was worth less than $1.2 billion. A U.S.-based lawyer for PDVSA said Exxon had initially asked for only $5 billion compensation.The judge said the hearing on whether to lift the asset freeze, which was originally scheduled to run until Monday, would likely go on until Wednesday.
Lawyers had expected the judge to issue his ruling next week, although this is now looking optimistic.
If the judge rules the English court has the right to award a freeze, he could decide that a lower figure, possibly $5 billion, was more appropriate, lawyers said.
Story by Tom Bergin, additional reporting by Michael Erman in New York, editing by Quentin Bryar and Carol Bishopric from Reuters
Reuters 02 Mar 2008 GMT
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