Venezuelan assets worth billions of dollars have been frozen by a UK court at the request of ExxonMobil as the US oil multinational fights for compensation over the nationalisation of its properties in the Latin American state.

The decision by the High Court in London to award an order preventing any sale of assets owned by the state-owned Petroleos de Venezuela (PDVSA) was described as “judicial terrorism” by Rafael RamÍrez, the Venezuelan Oil Minister.

He said that the court actions had no impact on PDVSA operations. The Venezuelan company owns refineries in Texas and has joint venture refining interests in Germany with BP and in Scandinavia with Neste, the Finnish oil company.

Exxon is fighting for compensation for its interest in Cerro Negro, a heavy oil production project in Venezuela’s Orinoco oil belt. In June last year, Hugo Chávez, the Venezuelan President, issued a decree giving PDVSA majority control over the foreign joint ventures in the Orinoco. PDVSA offered to pay book value for the assets, but Exxon says that failed to reflect their market value.

The American company made a request on January 25 for arbitration with the International Chamber of Commerce over its dispute with PDVSA, seeking damages for breach of agreements relating to the Cerro Negro projects.

The asset freeze is an attempt to prevent PDVSA from avoiding enforcement of any award against Venezuela by the arbitrators.

“The freezing order prohibits PDVSA from disposing of its assets worldwide up to a value of $12 billion (£6.2 billion),” Exxon said. In addition, Mobil CN had obtained similar attachments against PDVSA assets up to a value of $12 billion in the Netherlands and the Netherlands Antilles. PDVSA operates a 350,000 barrel per day refinery in the Netherlands Antilles.

The company said it had also obtained an assset freezing order of about $300 million from a New York court.

The Venezuelan Government attempted to downplay the impact on PDVSA of the rulings. The state oil company is the main source of foreign currency in the Latin American state where President Chávez has embarked on a massive housing programme for the country’s impoverished population, which has not benefited from its oil wealth. PDVSA is still struggling to raise its oil output after a big strike in 2005.

The oil nationalisations in the Orinoco were initially vigorously opposed by all the foreign investors, including BP, Chevron, Total and Statoil but each firm eventually settled with PDVSA. The court rulings were temporary and did not affect the operations of the assets involved, Mr RamÍrez said, adding their value was far less than $12 billion.

Mr Chávez has successfully exported his “get tough” policy with foreign oil companies elsewhere in Latin America, notably in Ecuador and Bolivia where the Government has seized gas assets belonging to Repsol and BG Group.

PDVSA is supplying financial assistance to Transport for London, financing Ken Livingstone’s programme of subsidies for bus travel. The Venezuelan company provides funding for the purchase of diesel fuel, but TFL officials were unable to say yesterday whether the asset freeze would affect the funding.

There are three big foreign joint ventures in Venezuela’s Orinoco oil belt, which is believed to contain some 80 billion barrels of recoverable oil. The largest joint venture, Sincor is operated by Total, the French multinational and has a third partner, Statoil Hydro of Norway.

Like Canada’s oil sands, the Orinoco oil is deposits of bitumen and viscous crude oil with the consistency of treacle. The deposits are huge, about 1 trillion barrels in place, but only 10 per cent may be recoverable. Extraction is expensive, energy-intensive and difficult involving the injection of steam at high pressure into wells to loosen the oil deposits and allow them to rise to the surface. The oil then has to be upgraded into a synthetic crude before it is refined into petrol.

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