Market Overview

ConocoPhillips Looks To Seize PDVSA's Oil Cargo In Curacao


ConocoPhillips (NYSE: COP) is trying to gain control of Venezuela's key offshore operations in the Caribbean in order to recover $2 billion from a decade-old row with the nation, per the sources.

ConocoPhillips has requested a court in the Dutch Antilles for control of facilities run by Venezuela's state-run oil firm PDVSA. Notably, PDVSA largely depends on facilities in the islands of Curacao, Bonaire and St. Eustatius. These facilities are used for the processing and storing of Venezuela's heavy crude before dispatching it to the three major global markets – the United States, China and India.

Once an oil-rich country, Venezuela is now embroiled in political and economic issues for nearly two decades under a socialist leadership.
In late April, an arbitration panel instituted under the International Chamber of Commerce found that Venezuela under the leadership of then-President Hugo Chavez had unlawfully seized investments from joint venture operations with ConocoPhillips. Thus, the company sought compensation at a local court for the fraudulent behavior. The demand made in the petition has not been made public. The $2-billion award corresponds to more than 20% of the cash-strapped government's foreign currency reserves.

The facilities on two of the islands are leased by PVDSA. Thus, ConocoPhillips cannot take control over them, even with a court order. However, it could seize Venezuela's oil stored in them and any state-owned ships that dock there, per experts.

Over the weekend, the oil tankers that left Venezuela's shores turned around before reaching the Caribbean islands. The storage facilities on two of the islands have the capacity to store crude valued $900 million, about 50% of Venezuela's monthly production.

Per Reuters, ConocoPhillips' action could impact PDVSA's exports of about 400,000 barrels per day from the Caribbean, or about a third of its total exports.

These legal actions will deal a big blow to PDVSA's already waning oil revenues and in turn Venezuela's economy, which is in deep recession with widespread shortage of medicine and food.

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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