MEDIA RELEASE PR35382
Perenco Warns That Suspension of its Contracts With Ecuador is Imminent due to
Ecuador's Refusal to Comply With International Arbitration Tribunal Orders
LONDON, July 14 /PRNewswire-AsiaNet/ --
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 $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
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
CONTACT: Rodrigo Marquez, Perenco Group, +44-20-7901-8200