Ecuador to take over Occidentals stake in pipeline

Limoncocha , Ecuador , May 24 | Updated: May 25 2006, 06:23am hrs
Ecuadors state oil company, Petroecuador, said on Tuesday it would take control next week of the 14.15% stake Occidental Petroleum owns in the Andean countrys only private crude pipeline.

Ecuador last week revoked Occidentals contract over accusations that the Los Angeles-based company sold part of an oil block without government authorisation. The company rejected those charges and has launched an international legal challenge to the seizure.

Petroecuador last week took over operations at Occidentals oilfields in the Amazon region, and says production remains at normal levels at about 1lakh barrels per day. Elsewhere in Latin America, leaders in Venezuela and Bolivia have also asserted more state control over natural resources to boost government revenues from foreign operators investing in oilfields.

The pipeline, which transports heavy crude from the Amazon oilfields to Pacific coast ports, carries 1.5 lakh barrels per day and has a capacity for 4.5 lakh bpd. Reuters

Petroecuador president, Fernando Gonzalez, said the state company would take complete control of Occidentals stake in the pipeline by next week. The state will be the owner of that stake, Gonzalez told reporters at Limoncocha, a former Occidental oilfield in the Amazon region.

He said the contract annulment forces Occidental to hand over all assets including extraction, exploration and transportation assets. Occidental owned a 14.15% stake in the pipeline, jointly owned by Ecuadors largest foreign oil operators including Brazils Petrobras and Spains Repsol YPF.

The pipeline, which transports heavy crude from the Amazon oilfields to Pacific Coast ports, carries an average of 150,000 barrels per day and has a capacity for 450,000 bpd.

A spokesman for OCP, the company that manages the pipeline, said that before any takeover, the state already had the right to transport up to 100,000 bpd through the pipeline and enjoyed a preferential price for each barrel pumped. An Occidental spokesman said the company was somewhat mystified by Gonzalez comments because its stake at OCP was not part of the contract annulled by Ecuador. It is difficult to understand on what basis he made this statement, Occidentals Larry Meriage said. The government never indicated to Occidental that the OCP was a target of the ... proceedings. This was a private investment.

A government official said on Tuesday Ecuador expects to forge a joint venture in less than 45 days with a Latin American state oil company to run Occidentals former oilfields. In 30 to 45 days a state oil company would be operating those fields, Jose Modesto Apolo, the government general secretary and close aid to the president, told reporters.

He declined to say which state oil company. Energy Minister Ivan Rodriguez has said candidates could include Brazils Petrobras, Venezuela PDVSA, Colombias Ecopetrol, Mexicos Pemex and Chiles ENAP.