No. of Recommendations: 2
The only way for Conoco Phillips to successfully push back is paying a bigger bribe to Trump than Chevron is willing to pay.
As it happens, I have 2024 annual reports for both companies at my fingertips. COP's net profit last year was about $9.245B, while CVX's was $17.661B, so, yes, Chevron has deeper pockets.
I asked the net sifter how Chevron was able to obtain a license to produce in Venezuela, when ConocoPhillips did not.
After ConocoPhillips was expropriated by the Venezuelan government in 2007, Chevron was able to maintain its position through different strategies and negotiations with the state-owned company PDVSA
. The primary difference is that ConocoPhillips had its assets outright seized, while Chevron was able to preserve its stakes in joint ventures and negotiate a path to recoup its investment.
The specific factors that enabled Chevron to secure a license and not ConocoPhillips include:
ConocoPhillips's expropriation: In 2007, Venezuela nationalized the oil industry, forcing foreign companies to convert their operations into joint ventures with PDVSA. ConocoPhillips refused the terms and the government seized its assets, leading to international arbitration. The company later won a $1.38 billion award for the seizure.
Chevron's willingness to adapt: Chevron agreed to the terms of the joint ventures with PDVSA. This decision, though controversial, allowed the company to keep a foothold in the country.
Asset preservation during sanctions: Later, during U.S. sanctions against Venezuela, Chevron was given special permission to maintain its assets and avoid a complete wind-down of operations. This allowed the company to stay engaged while other firms were forced out.
Recouping investment: When Chevron received a restricted U.S. license in late 2022, it was structured so the company could recoup billions of dollars in unpaid revenue and accumulated debts. The deal allowed Chevron to take all the oil from its joint ventures with PDVSA for a period without sending proceeds to the Venezuelan government.
Strategic importance and U.S. government policy: Chevron's continued presence in Venezuela was viewed as a stabilizing influence that countered the growing influence of other state-backed oil companies from Russia and China. Restoring Chevron's ability to operate was also seen by U.S. policymakers as a way to increase global oil supply and provide relief for certain refiners
iirc, the other big loser in Venezuela was Exxon. Most of the oil companies from other countries, whose assets were nationalized, took the compensation Chavez offered, and called it a day.
The net sifter on Exxon's experience.
Yes, Exxon lost its investments in Venezuela due to nationalization in 2007, after refusing to cede majority control to the state-owned oil company, PDVSA. While Exxon was ultimately awarded compensation in international arbitration, the amount it received was significantly less than what it sought and was a complex, drawn-out legal battle.
Nationalization and Departure: In 2007, the Venezuelan government nationalized its oil industry, and Exxon Mobil's heavy oil assets were seized after the company refused to restructure its holdings to give PDVSA majority control. Exxon Mobil, along with ConocoPhillips, quit their operations in Venezuela after failing to reach a deal.
International Arbitration: Exxon Mobil pursued compensation through international arbitration.
The International Chamber of Commerce (ICC) initially ruled that Exxon was entitled to about $908 million (later reduced to around $750 million after a counter-claim) of the $12 billion it had sought, which Exxon found disappointing.
Later, the World Bank's International Centre for Settlement of Investment Disputes (ICSID) ruled in 2014 that Venezuela must pay Exxon Mobil $1.6 billion in compensation for the seized assets, a decision Exxon said confirmed the government failed to provide fair compensation.
Compensation: The total compensation Exxon received from Venezuela ended up being significantly less than its original claim, but was still a substantial amount in international arbitration.
The net sifter provides this breakdown of the participants in the Venezuelan oil patch.
Petropiar: PDVSA (70%), Chevron (30%)
Petromonagas: PDVSA (60%), Rosneft (40%)
Petrolera Sinovensa: PDVSA (60%), CNPC (40%)
Venangocupet: PDVSA (60%), Cupet (20%), Sonangol (20%)
Rosneft is, of course, Russian. CNPC is Chinese. Cupet is Cuban. Sonangol is based in Angola.
I expect his nibs to allocate a major share of PDVSA to himself. I would expect him to take a page from #43's book, regarding the rest. #43 voided all the contracts Saddam had signed with other oil companies, and reopened the bidding so US companies could get a piece of the action. I would expect Rosneft, CNPC and Cupet to be tossed (Trump tends to be Putin's slave, except when it comes to oil and gas), and their interests allocated among the US companies whose assets were nationalized, primarily COP and XOM.
Steve
