Image caption The ruling may be a boost to President Hugo Chavez

Venezuela has said it will pay Exxon Mobil $255m (£164m) in compensation for assets nationalised in 2007 - less than a third of what an arbitration panel awarded the oil giant.

The International Chamber of Commerce (ICC) in Paris had ruled that PDVSA, Venezuela's state oil company, was required to compensate the US firm.

It said PDVSA should pay Exxon $908m.

But PDVSA said that debts owed by Exxon and court action meant the amount it would actually pay would be much less.

Exxon said the ICC award gave the company "$907.6m of real financial benefit in the form of debt relief and cash".

PDVSA said Exxon had previously used international courts to freeze $300m in Venezuela's US accounts, and added that Exxon owed $191m relating to the financing of an oil project in Venezuela, as well as $160m that the arbitration tribunal said was due.

Exxon had reportedly sought $10bn in compensation for the nationalisation of its heavy crude upgrading project in Venezuela's oil rich Orinoco belt.

"After four years of arbitration, the real amount determined by the ICC tribunal indeed represents less than the exorbitant sum initially demanded," PDVSA said in the statement.

The Venezuelan government said in September it had offered Exxon $1bn to settle the case.

Future cases

It is one of many arbitration cases currently under consideration after Venezuelan President Hugo Chavez ordered the nationalisation of the assets of some oil companies including Exxon and Conoco Phillips.

"They must be elated that they got off so cheap. It's certainly a happy new year for Venezuela," said Russ Dallen at Caracas Capital Markets after the ICC announced its ruling.

The decision was made by an arbitration tribunal at the ICC. Under the rules of the arbitration, its decisions are binding.

Exxon will hope for a better result in the next case concerning the nationalisation of its Cerro Negro heavy oil project, which is being heard by a different arbitration panel.

An Exxon spokesman said: "The larger ICSID (International Centre for Settlement of Investment Disputes) arbitration against the government of Venezuela is ongoing and is expected to be argued in February for the fair market value of the project.

"We recognise Venezuela's legal right to expropriate assets subject to compensation at fair market value."

Much of Venezuela's so far untapped reserves are harder-to-process heavy oil, and the Venezuelan government has been keen to increase state revenues from these reserves.

Analysts have said the country's aggressive nationalisation strategy may have deterred foreign investors and limited oil production.

But despite the moves, which saw Exxon and Conoco Philips leave the country, other oil firms have continued to invest.

In 2010, US firm Chevron and Spain's Repsol signed investment deals to exploit resources in the country's Orinoco belt.