STATEMENT BY PEOPLE’S MINISTER OF ENERGY AND PETROLEUM AND PRESIDENT OF PDVSA, RAFAEL RAMÍREZ, ON THE EXXON MOBIL-PDVSA ARBITRATION CASE 

Friday, February 8, 2008
PDVSA La Campiña - Caracas
________________________________

"We consider it pertinent to make certain clarifications regarding the situation at hand, which is being depicted in an alarmist manner in the national media.

First, I must explain the context of the situation. As the Venezuelan people know, we are in a process that ended last year with the Nationalization of the Association Agreements in the Orinoco Oil Belt, which were signed in the 1990s during the Oil Openness period. The legal foundation for this decision is the Decree 5,200, issued on February 27, 2007. Based on this decree and our actions, we have accomplished the migration of all projects in the Orinoco Oil Belt to the Mixed Company scheme.

During this process, we have engaged in arduous negotiations and agreements with companies such as Total, Statoil, ENI, Conoco Phillips, Petrocanada, CNPC, Petrochina, Ineparia, British Petroleum; in other words, the major oil companies worldwide, and of course, also with ExxonMobil. This particular case is the only one in which we have come to a particular, clearly conflictive situation. According to these agreements signed in the 1990s –and we denounced this situation in due time-, with the approval of the directors of the old PDVSA and the former members of the National Congress at that time, these national strategic issues are allowed to be settled in international courts – what we have called international arbitration.
See: Oil openness, re-privatization of the oil business

A very important aspect of our Constitution and the new agreements we have signed, e.g. the operational agreements, is that this concept is not present, because we believe it is detrimental to our sovereignty and the interest of our nation. However, since it was included in the old agreements, two US companies resorted to arbitration. One of them is Conoco Phillips and the other, ExxonMobil. In the case of Conoco Phillips, we have had an important number of meetings with its president and CEO, Jim Mulva, with the intention of reaching an agreement, and I believe we are on the right path. We must remember that we also faced arbitration in the past by the company Ennel against our country in the case of Orimulsión, and this arbitration was won by the Republic in the Chamber of Commerce of Paris. We had another case of arbitration with ENI regarding the field of action, and we have discussed with this company at the highest levels because we are in the verge of a settlement. We were also in arbitration with Total for the Jusepín field and we also reached a settlement. What I want to say here is that the Republic, although we do not agree with the presence of international arbitration in these agreements, has consistently respected this legal concept, and has always defended the nation’s interest.

We have the same situation with ExxonMobil, only that this company has not respected the terms of the arbitration, and has decided to exert legal pressure upon our national oil company.

Now, what is really happening with ExxonMobil? ExxonMobil requested arbitration against the Republic before the ICSID, which is an entity attached to the World Bank, in August 2007. In face of this situation, we have decided to set up the Arbitration Committee; arbitrators from PDVSA and Exxon Mobil have been appointed, and we are expecting the establishment of the Arbitration Committee to commence the trial, which we are sure, will favor the interest of the Republic.

Last December, ExxonMobil, apart from the arbitration with Republic, filed a lawsuit against PDVSA; here is where we see clearly ExxonMobil’s position, to act against the sovereign rights of an oil producing country as Venezuela.

All issues related to Nationalization are decided upon by Venezuelan state and government, which affects both multinational companies and Petróleos de Venezuela. In this regard, we are facing a lawsuit against PDVSA, and arbitration against PDVSA, as established in the agreement. And I must reiterate that the old PDVSA signed these agreements accepting these issues to be taken to international arbitration courts. We are also trying to reverse this process.

In these cases, the Republic is represented by international law firms that, of course, are registered and can operate in New York City, where the arbitration trials are taking place.

Last December, before the end of the year, we started to receive information –we were not notified before, because the action was supposed to spark off a situation of surprise and uneasiness- about ExxonMobil’s claims through different courts. The first one was a lawsuit against PDVSA Cerro Negro, aimed at obtaining a preventive measure of freezing of assets owned by PDVSA Cerro Negro. We must remember that PDVSA Cerro Negro does not exist. Last October, our sovereign National Assembly approved a mixed company called Petromonagas, which was established between Petróleos de Venezuela and British Petroleum, so all operations are performed now under this new company.

In the end, ExxonMobil was granted this preventive measure. I must be very clear because it worries me that the national media are so misinformed about the situation, or perhaps intent to manipulate it; the media are informing that company assets accounting for $12 billion are frozen, which is completely false. First of all, there is as yet no final court decision regarding our assets.

There is a preventive measure issued by a New York court, and we have the right –and will exercise it- to appeal. In other words, it is a provisional measure, while Petróleos de Venezuela presents its arguments; we are defending ourselves, we are defending the interests of the Republic and we are sure we will have this measure reversed.

But at the same time, ExxonMobil filed the same accusation and obtained the same preventive measure against PDVSA before a court in London and one in The Netherlands, with the same intention: freezing the assets we have in those jurisdictions, both in The Netherlands and London. I must inform that we do not have assets in those jurisdictions that even come close to that amount.

There is also manipulation about assets of the Isla refinery, in the Netherlands Antilles, supposedly being frozen, but everyone in the country knows that we do not own that refinery. The agreement with the Isla refinery is basically a leasing contract. That is, those assets are not and were never owned by Petróleos de Venezuela.

The intention of this preventive measure is for the judge to come to a decision, while it is certified that we are a solvent company that can abide by with any decision made by the arbitrators.

ExxonMobil’s attitude does not come as a surprise to us, because this company is the typical American multinational that, as we have denounced, has historically strived to attack oil producing countries and impose their position regarding the management and use of natural resources. This company has a long history that proves us right.

Our country is being attacked by a multinational corporation. I must say on behalf of our government, our people, our workers and our oil industry, that we will not be alarmed, intimidated, nor will we cease in our people’s sovereign aspirations of managing their own natural resources.

There is no PDVSA account with frozen funds; we only have PDVSA Cerro Negro with $300 million pending the decision to be made as part of the legal action in that New York court.

I must also say, however, that whichever decision is made on the $300 million, it would not affect our cash flow in any way; it would not affect our operations because our industry is 100% operational regarding production and shipments. I reiterate that this is a maneuver by this multinational, which by the way announced with great fanfare that it recorded record revenues in 2007, and tries to intimidate us to make our Bolivarian government reverse its decisions. They will not be successful.

There are no PDVSA assets or accounts for any amount frozen in England. This measure is all a lie, a publicity stunt with no direct effect on our operations or assets. It is necessary to warn our country because this type of action may be seen again in the future, and we must stay strong in our position as people and as government in the defense of our decisions.

If they want to act against our national company, PDVSA, to make us reverse our decisions regarding Nationalization and our control over the oil and gas industry, then, people from ExxonMobil, you are mistaken, just as you have been mistaken in the past. These preventive measures are provisional measures, a protective measure, to protect poor ExxonMobil from evil PDVSA.

This week we will present our arguments as it is established in this type of procedures. No one can make judgment about Venezuela beforehand, no judge can say we are guilty and confiscate our assets beforehand. Venezuela has decided to accept entering the regular procedure in court and we will follow through; Venezuela has accepted to go to arbitration because it is established in the agreements. It is important for our people to know that in the new mixed company accords under the Bolivarian government, this situation will not be possible, because we believe national sovereign issues should not be settled by any foreign court.

Additionally, we believe this is part of a strategy, typical of many companies and law firms in this type of situations. Therefore, ExxonMobil’s attitude comes as no surprise, because we know its history of abuse and attacks in the oil industry worldwide; what does come as a surprise is that a company that boasts high levels of ethics and responsibility and worldwide operations tries to subdue us into a situation of legal and judicial terrorism. We will not cave; we will defeat them on their own turf; and we call upon everyone to monitor closely this situation.

Furthermore, I must express our rejection to another sad and grotesque situation: the joyful celebration by certain sectors of our society for the fact that a multinational company is acting against a national company. We have seen, unsurprisingly of course, because we have seen similar attitudes during the oil sabotage and other attacks against our company, but with a great deal of astonishment, how some mainstream media seem to demonstrate in their news programs an open attitude of support to the interest of multinational companies.

We call upon all Venezuelans to defend the nation’s interest, and the state is acting in the defense of the interest of the Venezuelan people. We are exercising the legitimate right we have over the management of our natural resources, a right advocated by Venezuela among oil producing countries since the creation of OPEC.

It is really sad to see how sectors in our society have acted. We must denounce publicly this type of behavior. ExxonMobil’s actions are based on statements made by Venezuelan nationals against their own country, from Venezuelan law firms. We will soon inform who these people are, even the experts, who not only act based on a dissenting political position, but are also betraying our country.

Regarding the arbitration, we have international firms highly experienced in the defense of the interests of oil producing countries; we have international arbitrators with a great deal of experience; we have an international lawyer’s office working in New York with branches in Europe and worldwide, and with a long history of success in the defense of oil producing countries; we also have our legal staff here in the country.

We will present our arguments, as part of the trial, and we will inform the Venezuelan people about the evolution of this process.

I must state that we had information about these actions, because we were notified when the lawsuits were filed, but we did not think it would go beyond the typical legal actions taken against our companies. What we conclude is that they are trying to harass our company and our country; they are trying to keep us in a state of fright.

For us, it is completely normal to face this type of legal situations. We must remember that our company, Citgo, has faced since 2007 a number of lawsuits against it, as has occurred with companies such as ARAMCO from Saudi Arabia. These are issues we have discussed at the OPEC, because we as oil producing countries understand that when multinational companies act against state-owned companies, they are acting against producing countries.

It is not up to us to be flexible because we are dealing with national interests, which are above the interests of any company. We will inform the country about the evolution of these legal actions, the arbitration, which could last up to five years, because these processes can take a long time; so, we are prepared for a long-lasting battle.

Next week we will have the opportunity to present our arguments both in the New York court and the court in London, which we will.

Our supply and our operations have not and will not be affected. What it is destructive for the interest of our country are those headlines in today’s newspapers, which are misinforming the country. They did not even bother reading in detail the legal actions filed against our company. In any case, we will publish an accurate report so everyone can be informed, with all details, because those headlines are dangerously alarming.

We are sure that in the next few hours, those who know about the subject and worldwide opinion-makers will have an accurate version of what is really happening.

We will continue discussing this issue with ExxonMobil in the terms they have decided, that is, in court.

Now, why did ExxonMobil acted this way? Because they expect us to accept the figure they are putting on the table, which is totally unrealistic. That figure they expect to receive is being discussed in the trial, and we also have our own calculations. So, they set a high figure to hedge their action and get indemnity.

Thus, we reiterate that if we are put under the arbitration, and then we are harassed with lawsuits, we have no option but settle the matter in the same way. This is a fairly aggressive strategy; it is not at all surprising; we will remain undaunted and we have our own calculation of how much ExxonMobil should receive in compensation, and we will see them in court to settle this situation.

ExxonMobil is harassing us and trying to create a financial agitation about PDVSA. We must say that, less than a week ago a syndicate of more than 10 banks renewed a line of credit of $1,250 million, in spite of having received information about ExxonMobil’s actions and about the court’s decision. We are talking about banks from Europe and North America, which disregarded this information because they know the strength and solvency of PDVSA, the reason why the renewed the line of credit."