ECUADOR ORDERS OCCIDENTAL PETROLEUM CORPORATION OUT OF THE COUNTRY FOR ILLEGAL SALE.
In mid-May Ecuador's government terminated Occidental Petroleum Corporation's contract to exploit oil resources on one of the country's most productive fields after a 19-month legal prosecution of the company for the unauthorized sale of an oil field. The US retaliated by suspending ongoing trade talks with the Andean country immediately after Energy Minister Ivan Rodriguez found against Los Angeles-based Occidental, also known as Oxy. The move followed an April vote in the Ecuadoran Congress that increased the royalties oil companies operating in Ecuador must pay.
Ecuador's termination of Oxy's contract means the largest single corporate entity extracting petroleum there has been ousted, opening the possibility for greater involvement by nearby Venezuela or Brazil.
Petroecuador told Occidental on May 16 that it was taking back the field known as Block 15, according to a statement from the state-run company. The field may be auctioned to Petroleos de Venezuela SA (PDVSA), Petroleo Brasileiro SA (Petrobras), or another company, Ecuador Public Administration Minister Jose Modesto Apolo said.
Modesto said that the state oil companies from Colombia or Mexico might also be candidates to replace Occidental as operator of the assets. "We have a list of companies, and a decision will be made in the short term," he said.
Ecuador said that Occidental failed to obtain government approval to transfer part of an oil block to Canada's EnCana Corporation in 2000. The company said it has complied with the terms of its accord for Block 15. EnCana has since sold its Ecuadoran assets to a Chinese venture called Andes Petroleum Company for US$1.4 billion. For almost two years, Ecuador's government had been considering whether to end Occidental's contract because of the unauthorized sale (see NotiSur, 2004-09-10).
Occidental offered Ecuador as much as US$1 billion in disputed taxes, investments, and extra revenue from its crude output to settle the dispute, company spokeswoman Jan Sieving said on March 21.
Fernando Proano, a spokesman for Petroecuador, said the same day that Occidental also asked the Ecuadoran government to extend the company's contract, which expires in 2012, through 2019.
Until the termination, Occidental--the fourth-largest petroleum company in the US--had produced about 100,000 barrels per day of the total 532,000 bpd Ecuador pumps. Occidental's Ecuador operations represented 7% of its total output. The company also holds a 14.5% stake in...
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