MEDIA RELEASE PR 353334
Perenco Calls on Ecuador Not to Sell Seized Oil and to Resume Negotiations
LONDON, July 8 /PRNewswire-AsiaNet/ --
Perenco Ecuador Limited ("Perenco Ecuador") today called on the Government of Ecuador to
cease efforts to sell oil seized from Blocks 7 and 21 in defiance of orders by international
arbitration tribunals, and instead to seek a negotiated solution to the dispute concerning the
applicability of Law 42 to Blocks 7 and 21.
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 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 and its consortium partner, Burlington
Resources Oriente Ltd. ("Burlington"), from Blocks 7 and 21 in Ecuador 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 are
orders "are binding on the party to which they are directed" and that the parties "are under an
international obligation to comply" with them. A copy of the tribunal's order can be found on the
tribunal in a separate ICSID arbitration commenced by Burlington issued a similar provisional
measures order.
Despite these ICSID tribunal orders, the Ecuadorian Government has twice attempted to
auction the crude oil it has seized from Perenco and Burlington. Petroecuador first attempted to
sell the seized oil at an auction in May, but no buyers materialized. Last week, on July 3,
Petroecuador convened a second auction, but the only bidder was Petroecuador itself.
Petroecuador has announced an intention to conduct a third auction today.
Rodrigo Marquez, Latin American Regional Manager for the Perenco Group, said: "The failure
of these auctions indicates that the international business community has taken heed of the
arbitration tribunal orders and the risks of buying oil that the Government has no right to sell."
Mr. Marquez added: "We continue to believe that a negotiated solution is best for everyone.
However, whether there are negotiations is at this point up to the Government. They have a clear
choice. If they continue attempting to enforce the coercive measures, there will be no
negotiations and the situation will deteriorate further. Perenco can neither negotiate, nor be
expected to continue to operate, when the Government - in defiance of orders by two
international arbitration tribunals - is seizing our entire production, forcing us to absorb all the
costs and risks, and essentially demanding that we operate the Blocks for the Government's sole
benefit. On the other hand, the Government could choose to comply with the tribunal orders by
suspending those measures. The tribunals established that during the pendency of the dispute
the Blocks 7 and 21 crude should continue to be sold by Perenco and Burlington, with the
disputed portion of the sale price put in escrow. As soon as the Government decides to comply
with those orders, the path will be clear for further negotiations."
Mr. Marquez said: "The Government had a fair opportunity to make its case to the arbitration
tribunals, and in both instances the tribunals concluded that the Government's position was
wrong. The tribunal orders are binding international obligations, which are also part of Ecuador's
legal system. We believe disputes that cannot be settled by the parties should be resolved by the
rule of law in an international forum, not by coercive measures."
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
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