Venezuela’s Citgo Refineries At Chance Of Seizure

BOSTON, MA: People walk through the rain in front of the Citgo sign in Kenmore Square, Boston, July 18, 2016. (Photo by Timothy Tai for The Boston Globe via Getty Images)

</div> </div> <p>In 2007, following Venezuela’s expropriation of billions of dollars of assets from U.S. companies like ExxonMobil and ConocoPhillips, I <a href="http://www.rrapier.com/2007/05/lets-confiscate-venezuelas-us/" target="_blank" data-ga-track="ExternalLink:http://www.rrapier.com/2007/05/lets-confiscate-venezuelas-us/" rel="nofollow">suggested</a> a potential remedy.</p> <p>Since Venezuela’s state-owned oil company, PDVSA (Petr&oacute;leos de Venezuela, S.A.) owns the Citgo refineries in the U.S., the companies that had lost billions of dollars of assets should target these refineries for seizure as compensation.</p> <p>These refineries have the same vulnerabilities as the U.S. assets in Venezuela that were seized. They represent infrastructure on the ground that can’t be removed from the country.</p> <p>Citgo has three major refining complexes in the U.S. with a total refining capacity of 750,000 barrels per day. Recognizing the vulnerability from asset seizure, PDVSA tried to sell these assets in 2014, and valued them at $10 billion. That value may be grossly overstated, considering that Venezuela subsequently pledged 49.9% of Citgo to Russian oil giant Rosneft as collateral for a $1.5 billion loan.</p> <p> </p> <p>In recent years, PDVSA has lost a series of arbitration awards related to expropriations, and companies have been looking for opportunities to collect. In May, ConocoPhillips seized some PDVSA assets in the Caribbean to partially enforce a $2 billion arbitration award for Venezuela’s 2007 expropriation.</p> <p><span>ConocoPhillips</span> had sought up to $22 billion — the largest claim&nbsp;against PDVSA — for the broken contracts from its Hamaca and Petrozuata oil projects.&nbsp;The company is pursuing a&nbsp;separate arbitration case against Venezuela before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The ICSID has already declared&nbsp;Venezuela’s&nbsp;takeover unlawful, opening the way for another multi-billion dollar settlement award that may happen before year-end.</p>

<p>Last week, a court ruling has opened the door for Citgo assets to be seized to pay for these judgments.</p> <p>Defunct Canadian gold miner Crystallex&nbsp;had been awarded&nbsp;a $1.4 billion judgment over Venezuela’s 2008 nationalization of a Crystallex gold mining operation in the country. A&nbsp;U.S. federal judge ruled that a creditor could seize Citgo’s assets to enforce this award.</p> <p>This ruling is sure to set off a feeding frenzy among those that have won arbitration rulings against Venezuela. Until the legal rulings are settled, it’s hard to say which companies will end up with Citgo’s assets. But it’s looking far more likely it won’t be PDVSA.</p>”>

BOSTON, MA: Folks stroll throughout the rain in entrance of the Citgo check in Kenmore Sq., Boston, July 18, 2016. (Picture by means of Timothy Tai for The Boston Globe by means of Getty Pictures)

In 2007, following Venezuela’s expropriation of billions of greenbacks of property from U.S. firms like ExxonMobil and ConocoPhillips, I instructed a possible treatment.

Since Venezuela’s state-owned oil corporate, PDVSA (Petróleos de Venezuela, S.A.) owns the Citgo refineries within the U.S., the firms that had misplaced billions of greenbacks of property must goal those refineries for seizure as reimbursement.

Those refineries have the similar vulnerabilities because the U.S. property in Venezuela that had been seized. They constitute infrastructure at the floor that cannot be got rid of from the rustic.

Citgo has 3 main refining complexes within the U.S. with a complete refining capability of 750,000 barrels in keeping with day. Spotting the vulnerability from asset seizure, PDVSA attempted to promote those property in 2014, and valued them at $10 billion. That worth could also be grossly overstated, taking into account that Venezuela therefore pledged 49.nine% of Citgo to Russian oil large Rosneft as collateral for a $1.five billion mortgage.

Lately, PDVSA has misplaced a chain of arbitration awards associated with expropriations, and firms were searching for alternatives to assemble. In Would possibly, ConocoPhillips seized some PDVSA property within the Caribbean to partly implement a $2 billion arbitration award for Venezuela’s 2007 expropriation.

ConocoPhillips had sought as much as $22 billion — the most important declare towards PDVSA — for the damaged contracts from its Hamaca and Petrozuata oil initiatives. The corporate is pursuing a separate arbitration case towards Venezuela prior to the Global Financial institution’s World Centre for Agreement of Funding Disputes (ICSID). The ICSID has already declared Venezuela’s takeover illegal, opening the best way for some other multi-billion buck agreement award that can occur prior to year-end.

Ultimate week, a courtroom ruling has opened the door for Citgo property to be seized to pay for those judgments.

Defunct Canadian gold miner Crystallex have been awarded a $1.four billion judgment over Venezuela’s 2008 nationalization of a Crystallex gold mining operation within the nation. A U.S. federal pass judgement on dominated creditor may snatch Citgo’s property to implement this award.

This ruling is certain to spark off a feeding frenzy amongst those who have received arbitration rulings towards Venezuela. Till the prison rulings are settled, it is laborious to mention which firms will finally end up with Citgo’s property. However it is taking a look a ways much more likely it may not be PDVSA.

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