Energy Minister Faces Possible Censure Over Oxy Case

Victor Granda, Ecuadorian lawmaker and president of the country's Socialista party, has motioned for congress to censure energy minister Iván Rodríguez for allowing US oil company Occidental (NYSE: OXY) to get away with alleged contract violations, according to a statement released by Ecuador's congress this week.

Granda called for the censure of the minister for not terminating Oxy's block 15 contract despite allegations that Oxy illegally transferred a 40% stake in the block to Canadian oil firm EnCana, is overproducing on some wells and has not complied with its investment plan in the block.

Granda believes government authorities have permitted Oxy to get away with illegal activities as a result of the company's strong ties to the US government, the lawmaker told BNamericas.

Granda declared Oxy's assets could be confiscated and handed over to state oil company Petroecuador if it is determined that the company violated its contract.

"Our position is that we have scrupulously adhered to our contractual obligations. There are no violations of the contract," Oxy spokesperson Larry Meriage told BNamericas, though he clarified that paperwork for new drilling operations has been submitted late on several occasions.

Ecuador's congress is currently in recess and will resume activities on January 15, Granda said.

Congress president Wilfrido Lucero Bolańos will then have 10 days to establish a date and time for a debate between Rodríguez and the parties motioning for his censure, with lawmakers voting thereafter.

Granda's motion is backed by the Socialista, Izquierda Democratica and Pachakutik parties, which already constitute 43 of the 51 votes necessary for censure. Granda indicated the censure could pass with a 60-70% margin.

Ecuador's President Alfredo Palacio named Rodríguez as energy and mines minister to replace Fausto Cordovez in June 2005.

"There has been a revolving door at the ministerial level," Meriage said. "These charges routinely come up against ministers. Every time one of the political parties is unhappy with the performance of this or that minister, they immediately want to bring him up against charges and that of course creates all kinds of difficulties for people to do their jobs."

Apart from the controversy about Oxy selling a stake in block 15 to EnCana without government permission, Oxy has also been involved in an ongoing tax dispute with the government.

Oxy won a US$75mn tax rebate from Ecuador last year in an international arbitration court ruling, but the government is appealing the decision. The money corresponds to a rebate for sales tax that Occidental paid Ecuador from 1999-2003.

"We've been operating in Ecuador since 1985, we've invested over a billion dollars in the country. We have not recovered our investment at this point and we continue to invest in the country. We'd be prepared to do more if the political situation becomes stable," Meriage continued. "It's a difficult operating environment, but while this has all been playing out our operations have not been affected at all."

Oxy's January-September oil production in Ecuador dropped to 42,000b/d from 46,000b/d in the same period in 2004.

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