Barclays: PDVSA may pay Exxon $3.7 billion, soon


$3.7 billion is a lot of money. Less than Exxon asked for, more than PDVSA originally offered. From Barclays analysts Alejandro Grisanti and Alejandro Arreaza:

We are expecting that the settlement presented to the ICC in New York will be settled soon, with a decision that PDVSA will need to pay USD3.7bn to Exxon….Although we and the market are expecting
that the first case, (with the ICSID) will be decided in 4Q this year, we are expecting that the settlement presented to the ICC in New York will be settled much sooner…Conoco has also filed two similar requests for arbitration. In this case, we expect first a ruling from the ICSID that could come in the third quarter of the year, and one from the ICC some time later.

This adds a bit of detail to a report last month in El Nacional, which also said Exxon could get $3.7 billion and ConocoPhillips $9 billion. Interesting to see Barclays putting its name behind such figures.

To explain briefly, Exxon filed two arbitration cases, one at the International Chamber of Commerce (ICC) and one at the International Centre for the Settlement of Investment Disputes (ICSID). They are both demanding big mother-loads of cash, initially on the order of $12 billion. The ICSID case, which is a bit easier to track thanks to public descisions, was reduced to about $6 billion when the tribunal decided to limit which acts of expropriation were within the scope of Venezuela’s bilateral investment treaties.

In any event, a $3.7 billion settlement in the ICC case would be a big settlement, well above the $2.5 billion that Oil Minister Rafael Ramirez put as the upper limit for all arbitration payments — in a Reuters interview two weeks ago. Barclays says it’s possible the deal will have Venezuela ship barrels, rather than cash. Exxon should make sure the contract is clear that the barrels need to be full.

THANKS to reader DC for sending the report!!