Exxon to receive 1 6bn compensation by Venezuela

Exxon Mobil is to receive $1.6 billion (£1 billion) in compensation from Venezuela for expropriated assets, an international arbitration tribunal has ruled.

The oil giant had claimed up to $16.6 billion over the nationalisation of its Cerro Negro Project and other losses in 2007.

The judgment from the World Bank's International Centre for Settlement of Investment Disputes (ICSID) comes at a troubling time for Venezuela, which is facing currency shortages.

The Exxon case is also one of 20 claims against the South American nation at the ICSID court demanding compensation for assets seized during a 2007 nationalisation spree led by the late President Hugo Chávez.

"On the one side, Venezuela comes out standing tall from this decision, however it’s also negative because they have serious cash flow problems," Asdrubal Oliveros, head of Caracas-based economic consultancy Ecoanalitica, told the Wall Street Journal.

Foreign minister Rafael Ramirez called it a victory for Venezuelan sovereignty over "exaggerated claims", referring to the much higher amount indicated by the Exxon Mobil.

Exxon Mobil said in a statement: "The decision confirms that the Venezuelan government failed to provide fair compensation for expropriated assets."

The company added that it "accepts Venezuela's legal right to expropriate the assets of our affiliates subject to compensation at fair market value".

Venezuela’s benchmark dollar bonds, due 2027, extended losses after the ruling, falling 0.8 cent on the dollar to close at 65.6 cents today (October 10th) in New York. The yield on the bonds rose 20 basis points to 15.5 per cent, Bloomberg reports.

“While Venezuela has been willing to compensate claimants in the past, the government is clearly working with limited liquidity and already faces tough policy trade-offs between servicing its liabilities and importing basic goods to satisfy its base,” Grais-Targow told the news source.

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