ConocoPhillips obtains authorization to seize PDVSA payments in Trinidad

The conflict between ConocoPhillips and the Venezuelan oil company Petróleos de Venezuela, S.A. (PDVSA) stems from the nationalization of the American company’s assets by Venezuela in the early 2000s. After several years of litigation and arbitration, ConocoPhillips secured a $1.33 billion compensation award against PDVSA. However, payments were halted in 2019, ending a partial settlement agreement worth $700 million. Since then, ConocoPhillips has been seeking to enforce this judgment in various jurisdictions.

The recent decision by the Court of Trinidad and Tobago is a significant milestone in this strategy. Judge Frank Seepersad authorized the seizure of payments linked to PDVSA’s participation in the Dragon gas project, estimating that the company might transfer its assets out of jurisdiction to avoid its obligations. He highlighted PDVSA’s prior move of its European headquarters to Moscow as a worrying precedent for international creditors.

Implications for the Dragon project

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 within a complex framework marked by U.S. sanctions. PDVSA’s involvement in this project makes its payments vulnerable to seizures, complicating negotiations with other partners and delaying the start of production.

ConocoPhillips’ intervention highlights PDVSA’s difficulties in protecting its international assets, as seizure attempts increase. PDVSA could see its revenues decrease, further limiting its ability to finance other cross-border projects, including the development of the Manakin-Cocuina and Loran fields, which are also being targeted by the American company.

Financial consequences for PDVSA

The potential seizure of payments from the Dragon project by ConocoPhillips exposes PDVSA to new financial risks. Already affected by declining production and severe sanctions, PDVSA is in an increasingly precarious position. This court decision could also affect other international partnerships, notably those with Guyana and Jamaica, where the company still holds exploitable assets. The Guyanese government recently challenged a similar decision by the local court, which would have allowed ConocoPhillips to seize payments related to a petroleum agreement with PDVSA.

In this context, PDVSA’s ability to meet its commitments to its partners and creditors becomes increasingly limited. The use of specific licenses from the Office of Foreign Assets Control (OFAC) for the Dragon project illustrates the delicacy of the situation: companies such as Shell and NGC must navigate legal restrictions while trying to secure their investments. This additional pressure could call the project’s viability into question 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 challenging, potentially discouraging other players from getting involved in similar projects.

U.S. support in the form of special OFAC licenses for the Dragon project reflects the geopolitical importance of this collaboration. However, if PDVSA continues to see its payments seized by foreign creditors, this could deter Trinidad from further engaging in joint projects with Caracas, pushing the country to turn to other regional partners.

The outcome of this case could redefine how international energy companies approach their relationships with Venezuela, both in terms of managing legal risks and investment strategy.