We predicted this summer that the Occidental v. Ecuador $2 billion record for largest investment arbitration award would not last long. The only question after this month's liability award in Conoco v. Venezuela is whether ConocoPhillips matches that record, or breaks it eight times over. Our projection is toward the upper end.

In 2007, as Conoco refused to accept Venezuela's sharp tax and royalty increases, then-President Hugo Chávez seized the company's stakes in three oil projects that now produce about 367,000 barrels of oil per day. On September 3, an International Centre for Settlement of Investment Disputes arbitration panel found that the tax and royalty increases were lawful — but that Venezuela had acted unlawfully by failing "to negotiate in good faith" to compensate Conoco for its nationalization.

Conoco was seeking $30 billion in ­damages, about a third of it flowing from the creative argument that it should recover losses on forgone U.S. tax credits on foreign oil and gas. That $10 billion disappeared when the panel ruled that it lacked jurisdiction over the U.S. claimant. Billions more disappeared when the arbitrators accepted Venezuela's numbers for the applicable tax and royalty rates.

What's left depends on compensation formulas. Venezuela wants to reckon damages by the formulas that Conoco agreed to in advance with Petróleos de Venezuela S.A. If those low formulas apply, then the final award would range from $2 billion to $4 billion, depending on what discount rate is chosen to determine the present value of future cash flow.

But if the arbitrators reject those formulas, damages could run as high as $17 billion.

In an extraordinary letter — posted on Petróleos' website and tweeted by the oil minister — Venezuela is asking the arbitrators to reconsider their basic finding that the state refused to negotiate in good faith.

The letter argues that the panel must hold a new evidentiary hearing on the issue of bad faith, and must examine WikiLeaks cables suggesting that Venezuela entertained paying fair market value in 2008. More fundamentally, it argues that Venezuela's pre-seizure offer of $2.3 billion was far from the sort of token sum that should be considered bad faith.

Conoco is apt to argue that a new hearing is uncalled for, and that bad faith was already in the air. If a hearing is held, it may argue that the cited cables were too late and contradicted by other evidence.

More fundamentally, Conoco may argue that Venezuela's settlement offer was in bad faith, no matter its dollar value, because it was based on book value rather than fair market value. As for the compensation formulas, Conoco says that they bind only Petróleos, and not the state.

Michael D. Goldhaber is senior international correspondent for ALM and The American Lawyer. Email: mgoldhaber@alm.com.