Ecuador's Govt. Nears Oxy Contract Decision

Ecuador's government aims to decide by September 20 whether to start proceedings to end US oil company Occidental Petroleum's block 15 contract for alleged breach of contract, a spokesperson for state oil company Petroecuador told BNamericas.

"We hope it will be next week [September 13-20], but there is not yet a date," the spokesperson said. "It's a large quantity of documents we are analyzing."

The national anti-corruption agency CCCC favors terminating the contract, which it says would translate to an annual benefit of US$1bn for the state, local newspapers reported.

This benefit would be the result of transferring Occidental's assets on block 15 and the Edén-Yuturi and Limoncocha fields to Petroecuador.

Ecuador's attorney general says that Occidental (NYSE: OXY) violated its contract by selling a 40% interest in block 15 to Canadian oil company Encana without permission from the government.

The attorney general also says that Occidental has failed to comply with the investment plan that it presented when it began operations on the block.

However, Occidental and Encana say that Occidental complied fully with its contract. "Occidental has been in compliance all along," an Encana spokesperson told BNamericas.

Occidental brought a lawsuit against Ecuador's government over a tax dispute, and in July this year an international arbitration panel ordered the government to pay Occidental a US$75mn refund, a decision that the government is appealing.

Ecuador's attorney general reportedly says that the two cases are unrelated.

"The one is not the other, this is a question of contracts," the spokesperson said, adding that in May 2004 Petroecuador had asked Occidental for information related to possible violations of its contract.

Occidental began producing oil in block 15 in 1985, and farmed out the 40% to Encana, then Alberta Energy, in 2000.

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