CARA­CAS-Venezuela has pro­posed pay­ing Exxon Mo­bil Cor­po­ra­tion US$1 bil­lion in com­pen­sa­tion for the na­tion­al­i­sa­tion of its as­sets in 2007, much less than the US oil gi­ant want­ed, the en­er­gy min­is­ter said on Wednes­day. In a tele­phone call to Reuters, En­er­gy Min­is­ter Rafael Ramirez al­so de­nied that the gov­ern­ment of Pres­i­dent Hugo Chavez was ne­go­ti­at­ing with Exxon sep­a­rate­ly from an on­go­ing ar­bi­tra­tion process at New York's In­ter­na­tion­al Cham­ber of Com­merce. "Our pro­pos­al is US$1 bil­lion for its as­sets .... We are not in ne­go­ti­a­tions with Exxon Mo­bil, nor has it crossed our minds to ap­proach them," Ramirez said. "There are no ne­go­ti­a­tions out­side the ar­bi­tra­tion tri­bunal. We have said that the rul­ing of the Cham­ber of Com­merce is com­ing out soon, but we do not know when."

Venezuela is bat­tling about 20 ar­bi­tra­tion cas­es trig­gered by na­tion­al­i­sa­tions that were or­dered by Chavez's so­cial­ist ad­min­is­tra­tion. The biggest by far are the cas­es brought by oil ma­jors Exxon and Cono­coPhillips. Ver­dicts against the South Amer­i­can OPEC mem­ber will like­ly run to bil­lions of dol­lars, which could put pres­sure on pub­lic fi­nances ahead of a pres­i­den­tial elec­tion in Oc­to­ber 2012, when Chavez will be seek­ing a new six-year term. Ear­li­er last Wednes­day, some me­dia quot­ed a se­nior Venezue­lan of­fi­cial, Pros­e­cu­tor Gen­er­al Car­los Es­car­ra, telling re­porters the com­pa­ny had cut its com­pen­sa­tion de­mand to US$6 bil­lion. That was much more than Venezuela has banked on pay­ing-but the com­ments caused spec­u­la­tion that the gov­ern­ment might be in ne­go­ti­a­tions and that a fi­nal deal could be near.

In a state­ment late on Wednes­day, Venezuela's state oil com­pa­ny PDVSA said Exxon's de­mand was ex­ces­sive and in­sult­ing. "The state oil com­pa­ny is not will­ing to pay the sum sought by Exxon Mo­bil as it be­lieves the amount is out­ra­geous, abu­sive and in­tend­ed to charge the peo­ple for what is the sov­er­eign ex­er­cise of its oil pol­i­cy," PDVSA said. The Exxon and Cono­co cas­es stem from the 2007 state takeover of ex­tra heavy crude projects in Venezuela's Orinoco Belt, one of the biggest oil de­posits in the world. The two com­pa­nies orig­i­nal­ly claimed more than US$40 bil­lion in com­bined com­pen­sa­tion, while Venezuela's state oil com­pa­ny PDVSA cal­cu­lat­ed the as­sets, af­ter pay­ments to cred­i­tors, were worth less than US$2 bil­lion.

Bar­clays Cap­i­tal said a pos­si­ble set­tle­ment in the Exxon case, which has so far been per­ceived as a risk by Wall Street, could be an op­por­tu­ni­ty for Venezuela to rat­i­fy its will­ing­ness and ca­pac­i­ty to pay. "We think high oil prices are sup­port­ive of the coun­try's cash flow, and it should be able to ful­fill its com­mit­ments in the next two years," it said in a re­search note. The dis­pute with Exxon is par­tic­u­lar­ly frac­tious. In ear­ly 2008 the com­pa­ny won a court or­der to freeze US$12 bil­lion of PDVSA as­sets. The freeze was swift­ly over­turned. Ear­li­er this year, Ramirez told Reuters that the Chavez gov­ern­ment had cal­cu­lat­ed that it would pay no more than US$2.5 bil­lion in to­tal to Exxon and Cono­co.

Some an­a­lysts say PDVSA might have to sell over­seas hold­ings to meet a big com­pen­sa­tion bill. The com­pa­ny has cash flow prob­lems de­spite high oil prices be­cause most of its in­come goes to­ward fund­ing Chavez's so­cial­ist spend­ing. But Ramirez says PDVSA is ful­ly sol­vent, would not have to sell as­sets, and al­ready has a com­pen­sa­tion plan in place.

Reuters