no way in hell exxon gives up $5bil without getting something good from venezuela! i'd love to know the inside deal on this one....

Exxon Cuts PDVSA Arbitration Claim to $7 Billion

October 20, 2010, 11:37 AM EDT

Oct. 20 (Bloomberg) -- Exxon Mobil Corp., the largest U.S. oil company, reduced its arbitration claim against Petroleos de Venezuela SA to $7 billion from $12 billion plus interest, the state oil company said in a notice for an upcoming bond issue.

The parties are preparing responses to be filed by Oct. 25 following an arbitration hearing that concluded Sept. 24, PDVSA, as the company based in Caracas is known, said in a preliminary notice on the bond sale that was obtained by Bloomberg News. PDVSA expects a ruling in 2011.

“We may incur losses arising from our pending arbitrations and litigation,” PDVSA said in the notice. “Venezuela recognizes the execution of foreign judgments and arbitration awards, subject to certain conditions provided for in Venezuelan laws.”

Venezuelan President Hugo Chavez has nationalized parts of the oil, metals, cement and utilities industries during his 11 years in power. Chavez forced foreign oil producers into joint ventures as minority partners in 2007 and is in international arbitration with the U.S.’s Exxon Mobil and ConocoPhillips, which rejected revised terms.

Exxon Mobil, based in Irving, Texas, filed for arbitration three years ago after abandoning a joint oil venture with PDVSA following contract changes by Chavez. The project was developed to pump tar-like crude and refine it into lighter synthetic oil.

Exxon initially won an order from the international arbitration court in the U.K. blocking PDVSA from selling $12 billion worth of assets anywhere in the world. The order was overturned by a U.K. court in March 2009.

PDVSA said on Oct. 18 that it would sell $3 billion of 8.5 percent bonds due in 2017 at par value to finance the company’s investment plan and fund social development projects.

An Exxon spokesman wasn’t available to immediately respond when contacted by e-mail.

--Editors: Robin Saponar, Dale Crofts

To contact the reporter on this story: Nathan Crooks in Santiago at ncrooks@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net