[StBernard] Venezuela, Exxon in refinery supply talks

[Westley Annis]

Venezuela, Exxon in refinery supply talks
Sat Mar 1, 2008 12:40am GMT
CARACAS (Reuters) - Venezuela is in talks with Exxon Mobil (XOM.N: Quote,
Profile, Research) over supplies to the Chalmette refinery, the oil minister
said on Friday, amid an escalating legal battle between the OPEC nation and
the U.S. oil giant.

Venezuela cut commercial ties to Exxon after it won court orders freezing up
to $12 billion (6 billion pounds) in Venezuela's assets but promised to
honor a supply contract with Chalmette -- a joint venture between Exxon and
Venezuelan state oil company PDVSA located in the U.S. state of Louisiana.

"There has been, with respect to the Chalmette refinery, the intention by
Exxon to ignore the supply contracts -- an issue we are discussing," Ramirez
told reporters.

An industry source told Reuters that Exxon had rejected several cargoes from
the Petro Monagas heavy oil project, formerly the Cerro Negro heavy crude
upgrader that Exxon ran until its nationalization last year.

"A couple of cargoes have been pushed back for not meeting the quality
specification," said the source, who spoke on condition of anonymity.

He said Chalmette, which receives most of its crude from the Petro Monagas
project, was receiving less than it normally does from the project.

But he said this may have been related to maintenance at the
192,000-barrel-per-day Chalmette, which in January began two months of
planned maintenance to add new environmental controls.

The cargo rejections do not necessarily reflect operational problems at
Petro Monagas, the source added, because PDVSA may have incorrectly
described the specifications of the crude being offered.

Exxon has filed two arbitration suits seeking at least $5 billion in
compensation for Venezuela's takeover Cerro Negro as part of leftist
President Hugo Chavez's nationalization crusade meant to advance his
self-styled socialist revolution.

PDVSA is challenging a London court order on the temporary asset freeze,
arguing the move was "weird" and based on "fantasy."

Venezuela's deputy energy minister has told local media that the government
has considered offering its stake in Chalmette as compensation for Cerro
Negro assets.

(Reporting by Brian Ellsworth; Editing by Christian Wiessner)