ConocoPhillips investigating possible Citgo sale

Reuters had the scoop yesterday:

Venezuela’s state-run oil company PDVSA is using the sale of its Citgo Petroleum Corp refining assets to hinder the ability of ConocoPhillips to collect an expected arbitration award, the U.S. oil company said in a Texas court filing.

Evidence indicates PDVSA is liquidating its Citgo interests “to remove the proceeds from the United States to Venezuela or elsewhere with the specific intent to hinder, delay or defraud its creditors,” Conoco said on Monday in a petition for court approval to investigate that claim.

But as is typical, the big wire service couldn’t be dicked to post the filing. So here you go, yours at no extra fee. The “donate” button is over there on the right if you want to support independent journalism that actually gives you original documents, rather than making you scrounge around for them.

Leak of Venezuela contractor documents raises questions (Updated)

lander1_foto-cortesia-tom

Tomás Lander

What appears to be a leak of internal documents from Missouri electricity industry contractor ProEnergy Services and Venezuelan contractor Derwick Associates adds to questions about how ProEnergy got deals to sell products made by General Electric, Pratt & Whitney and Rolls Royce to Venezuelan state industries starting in late 2009.

The documents, posted to the website Scribd Nov. 17 by a person using the name “Tomás Lander,” include a proposal dated June 2009 from ProEnergy to Venezuela offering power plants. At the time, Venezuela was suffering periodic blackouts because demand for electricity was growing, a drought was draining hydroelectric reservoirs and the 2008 commodities bust had left the country with limited cash to deal with the crisis.

I haven’t been able to confirm that the documents are genuine. I sent e-mails to Derwick Associates’ press line, ProEnergy CEO Jeff Cannon and ProEnergy chief counsel Scott Dieball, asking them to validate or refute the authenticity of the documents and requesting comment. I haven’t received any response. At a glance, nothing about the documents indicates that they are forgeries. As such, for the rest of this article I will treat them as genuine documents. If ProEnergy, Derwick or anyone else offers any commentary on the documents, I will update this post to reflect their response.

The documents don’t show what happened to that ProEnergy proposal. However, another document shows that two months later, ProEnergy and Derwick agreed to cooperate in seeking work in Venezuela. Their agreement forbids either company from revealing “any and all details regarding transactions between Derwick and ProEnergy, details regarding transactions between a party and third parties, and the payment of fees and commissions.”*

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The curious case of N9GY

Taken without permission from Photobucket. Click for original.

Taken without permission from Photobucket. Click for original.

Back in July, Venezuelan General Hugo “Pollo” Carvajal arrived in Aruba by plane to take up his new position as a diplomat on the Caribbean island nation. Instead of going to a plush office to stamp visas, he was sent to jail for potential extradition to the USA on a freshly unsealed indictment for drug charges. Over the next few days, Venezuela reportedly did whatever it could to get Carvajal back, including raising the threat of military action. Carvajal was eventually freed, made persona non grata in Aruba, and sent home.

As I wrote at the time, one of the oddest parts of the whole affair was the widespread rumor that the plane that ferried Carvajal to Aruba had tail number N9GY. That plane is registered to a Delaware company called Global Air Services Corp. According to a record filed with the Texas secretary of state, Global Air Services Corp. is ultimately part of the far-flung corporate empire of Venezuela-American oilfield supply impresario Roberto Rincón.

César Batiz wrote a long, fascinating profile of Rincón over the weekend in Armando.Info, a relatively new Venezuelan investigative reporting outfit. I helped with the story, mostly gathering information on Rincón’s Texas companies and planes. There is one very curious piece of this that you, dear reader, may be able to help explain.

Plane owners can keep their real-time flight records off of websites like FlightAware.com by filing a confidentiality request with the US Federal Aviation Administration. However, flight records are still public documents. We filed a Freedom of Information Act request to the FAA to get flight records for N9GY. Here’s what we got for the dates in question:

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As you can see, the records show the plane arriving at Orlando July 18 and not leaving again until August 5. But we have people around the Caribbean claiming to have seen that plane during that period. And then, on August 6, the plane got to Merritt Island, without ever registering a flight to get there.

So what happened? Can someone in the aviation world help explain this to me?

Couldn’t happen to a nicer guy

Chile detained Cristian Labbé, the former mayor of the Providencia borough, for allegedly conspiring to kidnap and kill people during the military dictatorship led by General Agusto Pinochet. Labbé was Pinochet’s bodyguard and allegedly served at Tejas Verdes, a major torture and execution center. After the dictatorship, the diverse, but majority upper-middle-class, voters of the Providencia borough repeatedly elected Labbé to be their mayor.

11152010141As mayor, he was known for maintaining the symbols of the dictatorship. He resisted to the end the proposed renaming of September 11 Avenue, one of the main streets through the borough. The dictatorship named the street for the date of the coup that brought Pinochet to power. Locals frequently corrected the street signs to say things like “Mal Día” or “Terrible” instead of 11 Septiembre.

But beyond the symbolic, Labbé also persisted in committing acts that should be considered human rights violations. When students — many as young as 14 — nonviolently occupied high schools across the country to demand educational reform, Providencia was the only place I heard about where police fired tear gas into the buildings to evict them. The use of gas in enclosed spaces continued even when elementary school children were present. Labbé unilaterally closed down schools and tried to expel any students who didn’t live in the borough, despite a supposed national policy allowing students to attend any schools they pleased. In short, he supported the use of extrajudicial punishments, including the brutal corporal punishment of tear gas, against children. When questioned, he scoffed at constituents.

His bullying attitude and a gradual shift in the demographics of Providencia (hardcore dictatorship supporters moving further uptown or just dying off) brought him an electoral defeat in 2012. He was so bitter at the loss that he stopped going to work during his lame duck period. The first meeting of the city council under the new mayor turned into a jubilation by the new regime, who promptly returned September 11 Avenue to its old title, New Providencia.

I don’t know what he did at Tejas Verdes, if anything. It’s now up to the courts to figure it out. In any case, this is another example of Chile showing the more “developed” world how to deal with rights violators.

Venezuela owes more $$ to Exxon (UPDATED)

In a surprise to no one*, a tribunal at the World Court’s International Centre for the Settlement of Investment Disputes decided that Venezuela was liable for expropriating ExxonMobil’s Cerro Negro heavy oil project and some other assets in 2007. The decision in English is here and in Spanish is here.

The money section is at the end:

, The Tribunal unanimously decides as follows:
(a) the Tribunal has no jurisdiction over the claim arising out of the increase in the
income tax rate for the participants to the Cerro Negro Project;
(b) the Tribunal has jurisdiction over the remaining claims, i.e.:
a. the claim arising out of the imposition of the extraction tax on the Cerro
Negro Project;
b. the claim arising out of the production and export curtailments imposed
on the Cerro Negro Project in 2006 and 2007; and
c. the claim arising out of the expropriation of the Claimants’ investments
in the Cerro Negro and La Ceiba Projects;
(c) the Respondent shall pay to the Claimants the sum of US$ 9,042,482 (nine
million, forty two thousand, four hundred and eighty two United States
dollars) in compensation for the production and export curtailments imposed
on the Cerro Negro project in 2006 and 2007;
(d) the Respondent shall pay to the Claimants the sum of US$ 1,411.7 million
(one thousand, four hundred and eleven million, seven hundred thousand
United States dollars) in compensation for the expropriation of their
investments in the Cerro Negro Project;
(e) the Tribunal takes note in both cases of the Claimants’ representation that, in
the event of favourable award, the Claimants are willing to make the required
reimbursements to PDVSA. Double recovery will thus be avoided;
(f) the Respondent shall pay to the Claimants the sum of US$ 179.3 million (one
hundred seventy nine million, three hundred thousand United States dollars)
in compensation for the expropriation of their investments in the La Ceiba
Project;
(g) these sums shall be paid to the Claimants net of any Venezuelan tax;
(h) these sums shall be increased by annual compound interest on their amount at
the rate of 3.25% from 27 June 2007
up to the date when payment of this
sums has been made in full;
(i) each Party shall bear its own costs and counsel fees
(j) the Parties shall equally share the fees and expenses of the Tribunal and the
costs of the ICSID Secretariat; and
(k) all other claims are rejected.

So, $1.6 billion plus 3.25% compounding interest, which according to my calculator, works out to a nice round $2 billion as of now, growing by another $65 million this year assuming Venezuela delays payment as long as it can.

*Note, the amount may be a surprise to some. I thought the award would be bigger, but it’s within the range that analysts have given for years. In any case, it’s almost 10% of Venezuela’s foreign exchange reserves, so it’s a lot by the Bolivarian Republic’s standards.

MAJOR UPDATE: No, it’s not $2 billion. It’s much less. Law prof and friend of the blog Julian Cardenas writes to point out paragraph 374:

Effectively, the total compensation payable to the Claimants is the amount specified
in paragraph 374 above, less the amount already received by the Claimants under
the ICC Award for the same damage. Double recovery will thus be avoided

And the referenced paragraph 374 says

As a consequence, the compensation to be paid by the Respondent for the
expropriation of the Cerro Negro Project remains in the amount of US$ 1,411.7
million (see para 368 above).

The ICC Award was $908 million. So I think this means the current value of the judgment is more like $1.1 billion. If that $908 million deduction also cuts into the interest owed, the award is less than $1 billion! That would indeed be a surprise, given how ExxonMobil originally demanded $15 billion and even (for a short time) got a Mareva injunction against Venezuelan state assets up to $12 billion. I don’t know how these things work, and additional writing on this will probably be for paying clients. But now you know!

ALSO: ExxonMobil writes with the following rather comment. I’ll just print it verbatim, it’s short:

The decision confirms that the Venezuelan government failed to provide fair compensation for expropriated assets.
Our goal with the arbitration was to seek compensation for the fair market value of assets that were expropriated by the Venezuelan government in June 2007. ExxonMobil recognizes the sovereignty of all nations and, while clearly not a desirable outcome, accepts Venezuela’s legal right to expropriate the assets of our affiliates subject to compensation at fair market value. ExxonMobil’s affiliate engaged in extensive discussions with PDVSA and government officials but was unable to reach agreement on fair compensation.

An edifying video

You could go to Harvard and take classes from Francisco Monaldi. You could hire Eurasia Group’s Daniel Kerner for big bucks. And you could wait months for a meeting with Chevron’s Ali Moshiri. Or you can go to YouTube and watch them speak with remarkable candor about the big picture of oil and gas in Argentina and Venezuela. For free, while you brush your teeth.

As usual, humans are failing. This master class by three of the top names in the industry has, count ‘em, 206 views.

Here are a few notes. I took more, but they’re for me. You need to go watch this one for yourself. Continue reading