CONOCOPHILLIPS HEADS TO ARBITRATION

C O N F I D E N T I A L CARACAS 002103 SIPDIS SIPDIS ENERGY FOR CDAY AND ALOCKWOOD NSC FOR JCARDENAS AND JSHRIER E.O. 12958: DECL: 10/02/2017 TAGS: EPET ENRG EINV ECON VE SUBJECT: CONOCOPHILLIPS HEADS TO ARBITRATION Classified By: Economic Counselor Andrew N. Bowen for Reason 1.4 (D) ¶1. (C) SUMMARY: ConocoPhillips (CP) Chairman, President and CEO James Mulva told the Ambassador on October 30 that CP will file an arbitration claim with ICSID against the BRV. Negotiations regarding compensation have proved unsuccessful to date but CP still holds out hope that the BRV may eventually negotiate in order to avoid arbitration. CP's attorneys have told Mulva that CP has a very strong case. END SUMMARY -------------- ARBITRATION -------------- ¶2. (C) CP Chairman, President and CEO James Mulva, accompanied by CP Venezuela president Roy Lyons met with the Ambassador on October 30 to inform him that CP would file an arbitration claim with ICSID in the next several days against the BRV over the expropriation of CP's investments. Mulva said the company and the BRV were still far apart on the valuation of the expropriated assets. CP considers the assets to be worth around USD 20 billion. Mulva stated he had promised Energy Minister Rafael Ramirez that he would personally inform him if CP decided to pursue arbitration. ¶3. (C) Mulva believes the arbitration claim will become public knowledge by the first week of November. He does not expect the decision to have an adverse effect on CP's stock price since the company took a USD 4.5 billion write-off in the second quarter of this year. ¶4. (C) According to Mulva, CP decided to pursue arbitration due to the glacial pace of compensation discussions. Mulva characterized the discussions as an exchange of conceptual proposals rather than negotiations. Although BRV and PDVSA officials repeatedly told CP that they wanted to avoid arbitration, they showed little flexibility during discussions and the two parties remained far apart in terms of the valuation of CP's investments. -------------- NEXT STEPS -------------- ¶5. (C) Mulva estimated that the arbitration process could last six to seven years. CP still holds out hope that it can reach a negotiated solution with the BRV. Mulva speculated that the BRV would not negotiate with CP for one to two years and then renew negotiations. Mulva added that CP's attorneys have told him that CP has a very strong case due to President Chavez' public statements regarding the expropriations as well as the BRV's actions during the process. DUDDY