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Ecuador's Atty. Gen. Targets Occidental

The official seeks to end a 19-year-old contract to operate oil fields, citing repeated violations.

August 25, 2004|From Times Wire Services

Occidental Petroleum Corp. committed 34 violations of its contract to operate oil fields in the Amazon jungle, Ecuador's attorney general said Tuesday in a petition to the Energy Ministry asking that the 19-year-old contract be terminated.

Occidental, which revealed late Monday that the government of Ecuador was considering canceling the contract, has denied any wrongdoing. The Los Angeles company said it was prepared to defend itself against the allegations during upcoming meetings with government officials.

Shares of Westwood-based Occidental declined 60 cents to $49.35 on the New York Stock Exchange.

The petition by attorney general Jose Maria Borja said Occidental's main contract violation was the unauthorized transfer of 40% of the operation to EnCana, a Canadian petroleum company, in November 2000.

The petition also charged that Occidental, the fourth-largest U.S.-based oil company, invested less than required by the contract, overproduced and failed to file drilling reports. The company has been fined repeatedly for breaking Ecuadorean petroleum regulations, the petition said.

"The reiterated breach of the hydrocarbons law, norms for hydrocarbons operations, and the Block 15 contract are motivation enough for this contract to be ended," Borja wrote.

The oil fields at issue are located in northeastern Ecuador, near the border with Peru.

The fields, known as Block 15, represent 8% of Occidental's worldwide production and 4% of its proven reserves.

Occidental produces about 47,000 barrels of oil a day from the fields, and EnCana produced about 30,000.

Occidental spokesman Lawrence Meriage said the Ecuador operations were continuing as normal.

The contract dispute comes amid a tax fight between Occidental and the Ecuadorean government. A London-based arbitration panel ruled in July that Ecuador had wrongfully withheld tax refunds through Dec. 31, 2003. The company was awarded about $75 million. Ecuador has appealed the ruling.

The attorney general said Tuesday's petition was unrelated to the tax dispute.

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