Refinery still running despite legal battle

Published 12:16 am Friday, February 15, 2008

NEW ORLEANS (AP) — The legal fight between Exxon Mobil Corp. and Venezuela has not affected a New Orleans-area refinery jointly owned by the oil giant and the Venezuelan state petroleum company, an Exxon Mobil spokeswoman said Thursday.

Exxon Mobil is challenging Petroleos de Venezuela SA, or PDVSA, over compensation for nationalization of one of four heavy oil projects in the Orinoco River basin, one of the world’s richest oil deposits.

Irving, Texas-based Exxon Mobil, the world’s largest publicly traded oil company, is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff in the event it wins a decision by an international arbitration panel.

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Venezuelan President Hugo Chavez threatened this week to cut off all oil supplies to the United States in response Exxon Mobil’s legal challenges. On Tuesday, PDVSA said it would stop selling oil to Exxon Mobil, although it was not clear how much crude that would affect.

Exxon Mobil and PDVSA are equal partners in Chalmette Refining LLC, which Exxon Mobil operates in the New Orleans suburb of Chalmette. It is designed to handle heavy crude, such as that produced in Venezuela. The facility can refine about 190,000 barrels a day. It employs about 600 workers, along with 500 who work for contractors.

‘‘Chalmette Refining LLC continues to operate as usual and continues to meet its customers’ needs,’’ said Exxon Mobil spokeswoman Margaret Ross, declining further comment.

Patrick Esteruelas, an analyst at New York-based Eurasia Group, said PDVSA has indicated it will not cut off oil to the Chalmette refinery. He said the plant has recently been refining some 80,000 barrels of Venezuelan oil a day.

That was nearly half of PDVSA’s total exports to Exxon Mobil’s U.S. refineries, which stood at 165,000 barrels per day during November, Esteruelas said, citing the most recent U.S. government figures.

‘‘As for the remaining oil exports to Exxon Mobil’s refineries … Venezuela will probably end up selling them to third-party traders, which may in the end sell them back to Exxon-owned refineries,’’ Esteruelas said. ‘‘This could end up just being a rerouting of Venezuela’s oil exports to Exxon, a partial rerouting essentially.’’

John Felmy, chief economist at the American Petroleum Institute, a trade association, said his calculations indicate Venezuelan oil accounted for about 5 percent of Exxon Mobil’s imports in November — a relatively small amount in the context of overall operations.

On Wednesday, U.S. District Judge Deborah Batts in Manhattan confirmed the freezing of $300 million in Venezuelan funds, finding it probable that Exxon Mobil will win its legal battle against the company.

A British court issued an injunction last month temporarily freezing up to $12 billion of PDVSA’s assets.

Venezuela Oil Minister Rafael Ramirez said Thursday that Exxon Mobil is demanding more than 10 times the compensation it could rightly deserve for the disputed nationalization.

Associated Press writers Ian James and Fabiola Sanchez in Caracas and John Porretto in Houston contributed to this report.