Ecuador Refuses to Recognize Occidental's Arbitration Claim

QUITO Jan 31, 2007 (AP)

Ecuador's government is refusing to recognize an arbitration claim by Occidental Petroleum Corp. (OXY), Energy Minister Alberto Acosta said in a report published Wednesday.

Occidental filed a claim in May with the International Center for Settlement of Investment Disputes in Washington seeking $1 billion in damages.

The dispute, which has been going on for two years, arose over a $75 million tax refund that Occidental accused Ecuador of withholding.

Acosta told El Comercio newspaper the arbitration wasn't admissible because Ecuador hadn't agreed to it.

Occidental spokesman Larry Meriage said that Acosta's position wasn't new and the company had no response other than to say the arbitration is proceeding.

The dispute led Ecuador to cancel its contract with Occidental, which produced about 100,000 barrels of crude daily in Ecuador, and seize its facilities.

Acosta said Ecuador would wait to see how the arbitration body rules to decide its next step. The government has not determined who will assume operations of the seized facilities, known as Block 15, he said.

Occidental's production represented about 20% of the country's total output. Occidental has invested about $1 billion since 1999 in its Ecuador operations.

Acosta also said the first shipment of refined Ecuadorian crude from Venezuela should arrive Feb. 22 or 23. The two countries entered into the refining agreement in January to help Ecuador meet its fuel needs.

Copyright (c) 2007 Dow Jones & Company, Inc.