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Occidental Petroleum contract revoked!
Ecuador voids EnCana-linked oil contract
May 16, 2006. 09:20 AM | GONZALO SOLANO | ASSOCIATED PRESS Toronto Star

QUITO, Ecuador -- Ecuador has revoked Occidental Petroleum Corp.'s Amazon oilfield concession following a long-standing contract dispute involving Canada's EnCana Corp., marking the latest sign of trouble for the world's major oil companies in South America. Energy Minister Ivan Rodriguez declared the contract "void" in a news conference on Monday and said the move signified "the immediate return to the state of contracted areas and the handover of all equipment, machinery and other elements of exploration or of production, industrial installations or of transport." In a news release posted on its website, Los Angeles-based Occidental said it remained "committed to an amicable settlement of this dispute." The company said it "has complied fully with all material obligations under its contract with the government of Ecuador and is evaluating its legal options to defend its interests." The announcement came hours after the head of state-run Petroecuador, Fernando Gonzalez, ruled out a negotiated settlement, calling a deal proposed by Occidental "nonviable and harmful" to the state oil company's interests. The letter also said such a deal would "impede" Solicitor General Jose Maria Borja's efforts since August 2004 to annul Occidental's exploration and pumping concession in Block 15, some 240 kilometres east of the capital of Quito. Borja contended the company violated a pact signed in May 1999 by transferring 40 per cent of its concession to Calgary-based EnCana in 2000 without authorization from the Energy Ministry. "I cannot go against public law," Gonzalez said. "All the elements are there and I cannot accept any transaction." The dispute with Occidental is one of the sticking points that led to an impasse in free trade talks with Washington. Occidental produces about 100,000 barrels of crude daily in Ecuador, about 20 per cent of the country's total output, and has invested about $1 billion since 1999 in its operations. The company said on its website that Block 15 accounted for some seven per cent of its worldwide first-quarter oil production as of the end of March. Ecuador's move comes two weeks after Bolivia nationalized its oil and gas industry. Bolivian President Evo Morales told the European Parliament on Monday that European energy companies would be able to profit from their investments in the country -- but wouldn't have control after the country nationalizes its natural gas resources. On Friday, Venezuelan President Hugo Chavez indicated his government may seek a larger ownership stake in key heavy oil projects run by foreign companies in the oil-rich Orinoco River basin. Other oilfields previously run by private oil companies under contract have been transferred to new "mixed companies" in which Venezuela holds a majority share.

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