LONDON, July 14 --
Perenco Ecuador Limited (Perenco Ecuador) and its consortium partner,
Burlington Resources Oriente Ltd. (Burlington), today announced that suspension
of their participation contracts with Ecuador is imminent unless the Government
of Ecuador complies with orders of two international arbitration tribunals that
prohibit the Government from seizing oil produced by the consortium.
Perenco Ecuador is the Operator of Blocks 7 and 21 in Ecuador. On February 19,
2009, the Republic of Ecuador and its oil company, Empresa Estatal Petroleos del
Ecuador (Petroecuador), commenced a coercive process to collect from Perenco
Ecuador approximately US$327 million they claimed were due under a 2006
Ecuadorian law (Law 42) by which the Government asserts a right to 99% of the
oil revenues above an arbitrary reference price. In March 2009, Petroecuador
began seizing crude oil produced by Perenco Ecuador and Burlington from Blocks 7
and 21 to satisfy the alleged Law 42 debt.
However, on May 8, 2009, a three member international arbitration tribunal
constituted under the auspices of the International Centre for the Settlement of
Investment Disputes (ICSID) unanimously ordered that the Republic of Ecuador and
Petroecuador were restrained from instituting or further pursuing any action -
including oil seizures - to collect from Perenco any payments [they] claim are
owed. . . pursuant to Law 42. The tribunal made clear that such orders are are
binding on the party to which they are directed and that the parties are under
an international obligation to comply with them. On June 29, 2009, a different
international arbitration tribunal in a separate ICSID arbitration commenced by
Burlington issued a similar provisional measures order. A copy of each
tribunal’s order can be found on the ICSID website,
Despite these ICSID tribunal orders, Petroecuador carried out three auctions of
the crude oil it has seized from Perenco Ecuador and Burlington. No buyers
materialized at the first auction held in May. The second and third auctions
were held on July 3 and July 8. In the final hour of each of those two recent
auctions, Petroecuador emerged as the sole bidder. As sole bidder, Petroecuador
purchased from itself approximately 2.5 million barrels of seized crude at about
half the current market price.
Prior to last week’s auctions, Perenco Ecuador and Burlington warned
Ecuador that defiance of the tribunals’ orders could likely result in
suspension of operations at the Blocks. Today, Perenco Ecuador and Burlington
notified the Government of Ecuador that suspension is now imminent.
According to Rodrigo Marquez, Latin American Regional Manager for the Perenco
Group, The Government’s conduct in violation of the tribunals’
orders has left Perenco Ecuador and Burlington exposed to all the cost and risk
of operations at Blocks 7 and 21 with no corresponding revenues. This situation
is unsustainable. The consortium cannot be expected to produce oil for the sole
benefit of the Government of Ecuador. Accordingly, not only will Perenco Ecuador
contemplate the possibility of enforcing its rights against buyers of the seized
crude, but Perenco Ecuador and Burlington have today informed the Government
that they imminently will suspend operations unless the Government complies with
the tribunals’ orders.
Mr. Marquez said, Even at this late date we encourage the Government to change
course and honor the tribunals’ orders. Those orders were issued through
fair procedures in which all parties’ views were considered. While the
orders prohibit continued oil seizures, they call for certain disputed amounts
to be placed in a escrow during the pendency of the disputes, which is a
reasonable and balanced solution.
Perenco Ecuador Limited is part of a privately held upstream oil and gas
company and is the operator of Blocks 7 and 21 in Ecuador.
SOURCE: Perenco Ecuador Limited
Rodrigo Marquez, Perenco Group, +44-20-7901-8200