Venezuela Official: Will Defeat Exxon In UK Court

Venezuela's oil vice minister said the country will find a way to defeat ExxonMobil Corp. in a U.K. court in coming days despite the company´s clout, and called the ongoing dispute with Exxon "not a big deal" for either party.

"We will not leave London cowing from a loss, because if Exxon wins it would set a bad legal precedent," Venezuela's Oil Vice Minister Bernard Mommer told local daily El Universal in an interview published Sunday. He recognized Exxon's clout as one of the world's most powerful oil companies but noted that the compensation case isn't that large in terms of money.

Venezuela's Petroleos de Venezuela, or PdVSA, is set to face off with Exxon in a U.K. court this week to resolve a court order that froze $12 billion in PdVSA's assets stemming from a compensation dispute.

President Hugo Chavez nationalized a series of heavy oil ventures in the Orinoco region last year, and offered foreign companies new contractual terms as minority partners. Exxon and ConocoPhillips (COP) bowed out and called for arbitration proceedings. Exxon secured court orders freezing more than $12 billion in PdVSA assets in the U.S., the U.K. and the Caribbean earlier this year, and PdVSA is now appealing that decision.

PdVSA officials claim that $750 million would be fair compensation for Exxon's assets, far less than the $5 billion the company has demanded.Mommer insisted, however, that Exxon first rejected an offer as a minority partner because the new contracts gave no allowance for arbitration overseas. "I want to reiterate that the disagreement with Exxon wasn't economic, it was because Exxon didn't want to accept that there was no arbitration clause included in the new companies," Mommer said.

Exxon and PdVSA jointly own a refinery in Chalmette, La., and originally PdVSA offered to give Exxon its half of the plant to compensate for Exxon's assets in Venezuela, according to the vice minister. Oil Minister Rafael Ramirez has said that PdVSA's 50% stake in Chalmette is worth much more than Exxon's overall holdings in the Andean country.

Mommer also confirmed that Venezuela is well on its way to imposing a new tax on foreign oil companies, known as the tax on sudden gains, following an announcement by Chavez in recent days. Through this tax, Venezuela expects to capture more revenue from a rise in oil prices, something Mommer considers only logical. All oil companies understand "that if prices continue at $100 a barrel, Venezuela wouldn't simply sit idly by with its arms crossed," Mommer said.

Lawmakers in Venezuela's congress are conducting a study on this new tax and expect to have a proposal ready in a matter of weeks.