The conflict between ConocoPhillips and the Venezuelan oil company PDVSA (Petróleos de Venezuela, SA) originated in the nationalization of the American company’s assets by Venezuela in the early 2000s. After several years of litigation and arbitration, ConocoPhillips obtained compensation of $1.33 billion from PDVSA. However, Venezuela stopped payments in 2019, ending a partial settlement deal worth $700 million. Since then, ConocoPhillips has sought to enforce this ruling in various jurisdictions.
The recent decision of the Court of Trinidad and Tobago represents an important milestone in this strategy. Judge Frank Seepersad authorized the seizure of payments related to PDVSA’s stake in the Dragon gas project, ruling that the Venezuelan company could move its assets out of the jurisdiction to escape its obligations. He notably mentioned the move of PDVSA’s European headquarters to Moscow as a worrying precedent for international creditors.
Implications for Project Dragon
The Dragon gas field, located on the maritime border between Trinidad and Venezuela, is a key component of the region’s energy strategy. The project, developed in partnership with the National Gas Company of Trinidad and Tobago (NGC) and Shell, aims to exploit underwater gas reserves in a complex framework marked by American sanctions. PDVSA’s participation in this project makes payments vulnerable to seizure, complicating negotiations with other partners and delaying the start of production.
ConocoPhillips’ intervention highlights the difficulties faced by PDVSA in protecting its international assets, while seizure attempts are increasing. PDVSA could thus see its revenues decrease, which would limit its ability to finance other cross-border projects, in particular the development of the Manakin-Cocuina and Loran fields, also in the sights of the American company.
Financial consequences for PDVSA
Potential seizure of Project Dragon payments by ConocoPhillips exposes PDVSA to new financial risks. Already affected by a drop in production and severe sanctions, PDVSA finds itself in an increasingly precarious position. This court ruling could also affect other international partnerships, including those with Guyana and Jamaica, where the company still has exploitable assets. The Guyanese government recently challenged a similar local court ruling, which would have allowed ConocoPhillips to seize payments related to an oil deal with PDVSA.
In this context, PDVSA’s capacity to honor its commitments to its partners and creditors is becoming increasingly limited. The use of specific licenses from the Office of Foreign Assets Control (OFAC) for the Dragon project shows how delicate the situation is: companies like Shell and NGC must navigate legal restrictions while seeking to secure their investments. This additional pressure could call into question the viability of the project and, by extension, the expected revenues for PDVSA.
Impact on regional cooperation
Beyond the financial implications for PDVSA, this court decision raises broader questions about energy cooperation between Trinidad and Venezuela. For several years, the two countries have been trying to establish cross-border collaboration to exploit gas resources in a region where energy demand is growing. However, legal disputes and asset seizures make this cooperation difficult, potentially deterring other actors from getting involved in similar projects.
US support in the form of special OFAC licenses for the Dragon project reflects the geopolitical importance of this collaboration. However, if PDVSA continues to have its payments seized by foreign creditors, this could dissuade Trinidad from further engaging in joint projects with Caracas, pushing the country to look to other regional partners.
The outcome of this case could redefine how international energy companies approach their dealings with Venezuela, both in terms of legal risk management and investment strategy.
