* Final ruling may take 1-2 years
* Company took charge of $4.5 billion
* Venezuelan minister says will ask panel to review finding
By Marianna Parraga
HOUSTON/CARACAS, Sept 4 Venezuela failed to act
in good faith or properly compensate ConocoPhillips for
three big oil assets the country expropriated in 2007, a World
Bank arbitration panel said on Wednesday
The partial ruling, which limited the scope of the company's
claims by excluding future tax credits, did not determine how
much money Venezuela must pay the U.S.-based company.
The company's projects were taken over during the leftwing
administration of deceased former President Hugo Chavez, who led
a wave of nationalizations that included the oil, electricity
and steel industries.
"The respondent breached its obligation to negotiate in good
faith for compensation for its taking of the ConocoPhillips
assets in the three projects on the basis of market value," said
the ruling by the International Centre for Settlement of
Investment Disputes (ICSID).
The company claimed victory, but a final ruling on damages
could take one or two more years, according to experts.
"This ruling sends a clear message that countries cannot
expropriate their investments without fair compensation," said
Janet Langford Kelly, a senior vice president of the company.
ConocoPhillips initially asked Venezuela for $30 billion in
compensation for its stakes in the Hamaca and Petrozuata heavy
crude upgraders and a separate offshore project called Corocoro,
but Venezuela offered no more than $2 billion.
The core of the dispute, the biggest against Venezuela
before an arbitration body, is over how to place a value on the
assets. ConocoPhillips demands payment based on market prices,
while Venezuela has offered to pay according to book value,
which would be much lower.
In 2007, ConocoPhillips took an after-tax charge against its
earnings of $4.5 billion related to its properties in Venezuela.
At the time, the Houston-based company said it believed the
assets were worth much more, but that was the amount allowed
under U.S. accounting rules.
Wells Fargo said that the initial write-down value is "a
good place to start" when determining what the payment should
be, even though it is significantly less that ConocoPhillips's
ConocoPhillips shares were up 1.4 percent in afternoon trade
NEGOTIATIONS AND FIGHTS
Venezuelan Petroleum Minister Rafael Ramirez harshly
criticized the panel and ConocoPhillips.
"We reject the tribunal's affirmation that we did not
negotiate in good faith. We reached deals with other companies,
such as Chevron," he said.
Several major foreign oil companies, including Chevron Corp
, reached agreements with the Chavez government to pay
higher taxes and royalties, and give up majority stakes in
projects while hanging onto minority ones.
ExxonMobil Corp and ConocoPhillips did not reach
accords with Venezuela and eventually pressed their claims in
Venezuela has more than 20 arbitration cases pending at
ICSID and other courts stemming from Chavez's nationalizations.
The country pulled out of the ICSID in 2012, but will still be
subject to cases submitted beforehand.
Analysts said the ruling could bode well for ExxonMobil's
case at ICSID.
Exxon received $908 million from state-owned Petroleos de
Venezuela (PDVSA) last year after a separate ruling by the
International Chamber of Commerce over the same claim.
Ramirez said he would ask for a new chance to show the panel
that the country acted in good faith.
"Let's see if the court respects what PDVSA and Conoco
signed when they became partners. They agreed at that moment
that any indemnification would have a top of $27 per barrel, not
100 dollars that is the current crude price. They wrote it, they
signed it, the court has it," the minister said in Caracas.