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Thursday, June 1, 2023

Ortega, ESSO Reach Buyout Agreement

MANAGUA – After half a year of tense relations, ESSO Standard Oil and the government of Nicaragua reached an agreement last week whereby state-owned oil company PETRONIC will buy an ESSO storage facility at Puerto Corinto and sell Venezuelan oil to the U.S. oil company at preferential terms offered by Venezuelan President Hugo Chávez.
Under the terms of the deal, ESSO – a subsidiary of U.S. oil giant Exxon Mobil – has agreed to sell the government its disputed Plant Number 1 at Puerto Corinto, as well as purchase and refine 600,000 barrels of Venezuelan crude oil every month.
Under the terms of purchase, 25% of the payment for the crude will go into a specially created social development fund to help the Sandinista government’s poverty relief programs.
The announcement was made Jan. 10, at the end of President Daniel Ortega’s first State of the Nation report. The president, who didn’t specify the price at which ESSO had agreed to sell its plant to the government, hailed the deal as a solution to the problems it had last year of importing and processing Venezuela oil due to a lack of government infrastructure.
Upon making the announcement, Ortega both praised and criticized ESSO. The president said, “We wish that all transnational businesses that operate in Nicaragua would do what ESSO has done,” but then went on to say that the oil company had agreed to the deal because it can profit from it, not because it cares about helping the country.
“If this weren’t business, there would be no accord,” Ortega said. “For the love of country, nothing! For the love of the poor, nothing! For love for the transport sector, nothing! They are in this for their love of money. And this [accord] will guarantee them a good income.”
Last year, Ortega’s government temporarily embargoed ESSO’s Puerto Corinto storage facility, claiming the company owed back taxes.
While the plant was embargoed, the government used the facilities to offload Venezuelan oil that ESSO had refused to handle.
The two sides arrived at a temporary storage agreement in September, and ESSO later agreed to pay its back taxes and sell Plant Number 1 to the government.
Though many investors became very nervous over the government’s original handling of ESSO, which some thought was a step toward confiscation, Ortega this week touted the results of his administration’s negotiations as a win-win.
“These are the results that we wanted,” he said. “We were discussing, dialoguing, and talking, and we got concrete results.”

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