ConocoPhillips stands out in Venezuela's vast universe of jilted creditors and claimants as a potential future commercial partner for state-owned PdV, a distinction that is driving aggressive international enforcement actions and quiet overtures for Caracas to resume payments of the company's arbitration debt.
The US independent's $10bn outstanding claims against Venezuela are the most significant among several now in flux behind the scenes as the Venezuelan government and US-backed opposition prepare to resume fragile political negotiations in Mexico this weekend.
ConocoPhillips is Venezuela's largest individual creditor, tied to two main international arbitration awards stemming from the 2007 seizure of its PetroZuata and Hamaca heavy crude joint venture interests and its participation in the offshore Corocoro field: $2bn from the Paris-based International Chamber of Commerce and $8.5bn from the World Bank's International Centre for Settlement of Investment Disputes (Icsid).
In a landmark 2018 agreement, PdV agreed to honor the ICC award with quarterly payments in cash or in kind. PdV paid around $754mn but defaulted in the fourth quarter 2019, blaming US sanctions that blocked access to its funds in Portugal's Novobanco, according to sources close to the parties.
The default prompted ConocoPhillips to resume enforcement actions that it had successfully deployed in the Dutch Caribbean, where it had relentlessly attached liens to PdV oil cargoes, storage and other assets to force the Venezuelan company into a payment deal, even though the value of the assets paled in comparison to the debt.
This year the Houston, Texas-based company is moving to attach shares of PdV's Dutch subsidiary Propernyn, which controls 15pc in European specialty refinery Nynas. A hearing in a Dutch court is expected to take place by year's end.
In reference to the remaining $1.25bn in the ICC debt, ConocoPhillips chief executive Ryan Lance told Argus yesterday that PdV has "an outstanding balance that they owe us so we are in discussions with them to repay that."
Caracas is seeking to annul the Icsid award altogether, a long-shot outcome that nonetheless buys time for the parties to hammer out a deal.
ConocoPhillips has a license from the US Treasury's Office of Foreign Assets Control (OFAC) to engage with PdV on the debt repayment.
The actions undertaken by ConocoPhillips in the Caribbean and the Netherlands come on top of its US litigation to claim the shares of Delaware-based PdV Holding in PdV's US refiner Citgo. The main plaintiff, Tenor Capital Management-controlled Crystallex, has steadfastly pursued its case that would lead to a sale of the Citgo shares once US protection is lifted, a watershed event that could take place early next year. A court-appointed special master has already issued a Citgo sale plan, but acknowledges that a superior pledge of Citgo shares held by PdV 2020 bondholders would likely impede the process.
Partner potential
For Venezuela's main political opposition represented by a crumbling interim government that controls Citgo, ConocoPhillips is seen as the most appealing creditor in a sea of mostly short-term interests, including defaulted bondholders and dealmakers looking to arrange debt-for-equity swaps.
ConocoPhillips, in contrast, had a long history in Venezuela before the 2007 nationalizations, and would be well-placed to participate in a rebuilding, all sides agree. The interim government is believed to have an "understanding" with the US company to honor the debt agreement, but it denied today that it has any separate payment agreement with the US company. The interim government has no real authority in Venezuela and even its US patron views its mandate as expiring in January 2022.
