Why 2007 foreign oil asset expropriation in Venezuela affected US oil majors

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Nov. 20 2020, Updated 3:39 p.m. ET

ConocoPhillips files for arbitration against Venezuela

On October 9, the same day Exxon Mobil (XOM) received the World Bank’s ruling, ConocoPhillips (COP) filed for arbitration against Venezuela’s state-run oil company PDVSA. ConocoPhillips is pursuing compensation for its nationalized oil projects. This filing comes on top of already-pending arbitration the company has before the World Bank’s ICSID (International Center for Settlement for Investment Disputes).

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ConocoPhillips is one of several major U.S. energy companies that suffered when the Venezuelan government expropriated assets in 2007. In September 2013, an ICSID tribunal ruled in favor of ConocoPhillips, calling the Venezuelan government’s action, “unlawful expropriation.” Learn more about the company in Market Realist’s Must-know: Key takeaways from ConocoPhillips’ Q2 earnings.

ConocoPhillips’ stock reacts to the Exxon Mobil ruling

ConocoPhillips’ stock fell 3% on October 9, following the compensation ruling in favor of Exxon Mobil in the Venezuelan asset expropriation case.

Read Part 6 of this series to learn why Exxon Mobil is critically dependent on its international operations.

ConocoPhillips’ involvement

ConocoPhillips (COP) made significant investments in the Petrozuata and Hamaca heavy crude oil projects, and the offshore Corocoro development project in Venezuela. In May 2007, the government expropriated all of ConocoPhillips’ operations without fair compensation. In late 2007, ConocoPhillips initiated arbitration against Venezuela before the World Bank’s ICSID.

Other major upstream oil companies were affected by the 2007 expropriation. These include Chevron Corporation (CVX) and Total SA (TOT). XOM, COP, and CVX are components of the Energy Select Sector SPDR ETF (XLE).

Despite the incident, Venezuela remains an important trade partner for the U.S., particularly in the oil and gas sector. Read on to learn why.

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