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CNNMoney.com: Exxon: Venezuela Row About Government Honoring Contract

February 18, 2008: 09:52 AM EST
(Adds comments from Exxon Chairman)
By Spencer Swartz
OF DOW JONES NEWSWIRES

LONDON -(Dow Jones)- Exxon Mobil Corp.’s (XOM) legal dispute with Venezuela is over the country’s failure to abide by its terms and obligations, ExxonMobil Chairman Robert Olsen said Monday.

“This is an issue about contract sanctity that provides the basis for all parties to know their rights and responsibilities,” Olsen told reporters on the sidelines of an energy conference here.

Venezuelan state-owned oil company Petroleos de Venezuela SA last week halted oil supplies to ExxonMobil after the U.S. major won court orders to freeze billions of dollars worth of PdVSA’s foreign assets.

Olsen later told Dow Jones Newswires that Exxon was still hopeful that a solution could be found between the company and the Venezuelan government.

“The arbitration panel is doing its work…We’re hopeful an amicable solution can still be found between us and the government,” he said.

ExxonMobil is seeking compensation for Caracas’ nationalization of oil assets in the Orinoco River basin in 2007. ExxonMobil filed for arbitration with the International Chamber of Commerce on Jan. 25. It was the second arbitration action filed by the company after it abandoned projects in the Orinoco Belt in June.

In a speech to analysts and industry officials Olsen laid out a case for how ExxonMobil has established strong working relationships with several other nations and cited Gulf state Qatar and Malaysia among those countries.

“We are viewed as partners in relationships (in Qatar and Malaysia) that go beyond oil and gas production,” Olsen said.

He also said ExxonMobil was trying to be “good listeners” to host governments to find out and cater to their economic growth requirements beyond simply pumping hydrocarbons. “We need to be listening,” he said.

Olsen, who has been ExxonMobil chairman since 2004, said oil nations were seeking a “deeper” relationship with foreign energy firms that entailed helping countries grow domestic industries and educate and train local staff.

As evidence of this, Olsen cited ExxonMobil’s work at Sakhalin in Russia’s far east. ExxonMobil’s work on the Sakhalin-1 oil and gas project was a good example that effective “partnering can deliver value to host governments.”

ExxonMobil has a 30% stake in Sakhalin-1, while the other partners are Japanese pair Itochu Corp. (8001.TO) and Marubeni Corp. (8002.TO), Russia’s OAO Rosneft (ROSN.RS) and India’s ONGC Videsh Ltd. (500312.BY).

Olsen said Sakhalin-1 was forecast to generate over $50 billion in revenue over the lifetime of the project and that 90% of the staff working on the project were expected to be Russian nationals by 2018.

Early 2007, Russian state-owned OAO Gazprom (GAZP.RS) took over the Sakhalin II venture, run by Anglo-Dutch Royal Dutch Shell PLC (RDSB.LN). And TNK-BP Holding (TNBP.RS), controlled by the U.K.’s BP PLC (BP), agreed to sell its majority stake in the Kovykta gas project to the Russian gas giant last month.

Olsen said cooperation between foreign oil companies and national governments was vital to increasing new energy supply because of the difficulty and increased costs of new oil and gas projects in more remote regions of the world.

The number of big energy projects over $5 billion in value each were expected to triple in number over the next seven years, Olsen said. No company has the financial resources, technology and know-how to take on such big projects alone, he said.

“By working together…our companies (foreign and state oil firms) will be able to accomplish more than if each of us tried to go it alone,” Olsen said.

-By Spencer Swartz, Dow Jones Newswires; +44 (0)207 842 9357; [email protected] dowjones.com

  (END) Dow Jones Newswires
  02-18-08 0952ET
  Copyright (c) 2008 Dow Jones & Company, Inc.

http://money.cnn.com/news/newsfeeds/articles/djf500/200802180952DOWJONESDJONLINE000245_FORTUNE5.htm

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