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Tuesday, September 29, 2009

Ecuador: Petroecuador Will Ask To Cancel Perenco Contract

September 23, 2009

QUITO (Dow Jones)--Petroecuador will ask the mines and oil minister to start a process to cancel the Anglo-French company Perenco Corp.'s contract in Ecuador, Luis Jaramillo, Petroecuador's head told Dow Jones Newswires on Wednesday.

"The request is ready. We are finishing a legal review to send this request to the minister," Jaramillo said in an interview.

"The company has not fulfilled its obligations and this is the reason to cancel the contract," Jaramillo said.

Perenco operated two oil blocks in Ecuador's Amazon region, along with ConocoPhillips's (COP) Burlington Resources. The consortium lost control of the blocks on July 16 when state-owned Petroecuador took over because of a tax dispute.

Last March, the government started to seize production from the two blocks, which together produce around 22,000 barrels a day, and said it would continue seizing and selling Perenco's oil production until overdue windfall taxes of around $330 million were paid.

On May 8, the International Center for the Settlement of Investment Disputes notified Ecuador it couldn't take measures against Perenco to recover the unpaid windfall taxes until an arbitration process ends.

Petroamazonas took over the operations of the Perenco oil fields after the company ordered a suspension of production. Perenco said Ecuador had violated the Icsid order.

According to Perenco, Ecuador's acts constitute an "expropriation" of Perenco and Burlington's investments.

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