China, Petroecuador sign oil supply agreement

PennEnergy

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 24 -- Ecuador’s state-owned Petroecuador, eyeing an advance payment of $1 billion, has signed an agreement to sell 3 million bbl/month of oil to PetroChina International Co. Ltd. over a 2-year period.

Under the contract, Ecuador has agreed to export 2.88 million bbl/month of Oriente and Napo crude, with the $1 billion—representing 28% of the total value of the oil PetroEcuador will export—serving as an initial payment.

Altogether, the contract envisages sales of 2.16 million bbl/month of Oriente crude and 720,000 bbl/month of Napo crude, with a further option that allows Petroecuador to deliver 5% more or less than the stipulated amount.

Petroecuador said revenues from the prepayment will be used for investment in the oil sector and for public works. The state firm also said the price of each oil shipment will be decided according to market conditions.

Diego Borja, Ecuador's minister of economic policy coordination, last week said Ecuador had asked China not to resell the oil to either Peru or Chile, which already buy much of Ecuador's exported oil.

However, Borja said China has not been restricted from selling the oil anywhere else, including California, long a market for Ecuadoran crude.

The agreement is one of several in recent months in which China has extended loans in exchange for secure supplies of crude oil. Indeed, China has signed half a dozen such agreements since February, for a total of $46 billion, to secure long-term energy supplies.

In addition to the $1 billion heading to Ecuador, these agreements include:

• Feb. 17—China Development Bank (CDB) lends $15 billion to Russia's OAO Rosneft and $10 billion to OAO Transneft, in return for supplies from East Siberian oil fields over 20 years.

• Feb. 18—CDB finalizes an agreement to extend a $10 billion line of credit to Petroleo Brasileiro SA (Petrobras) for 100,000-160,000 b/d of oil to be sold at market prices.

• Feb. 21—China gives $4 billion in financing to Venezuela’s Petroleos de Venezuela SA, which has increased shipments to China to reduce the country’s traditional reliance on sales to US markets.

• Mar. 13—Angola confirms receiving another $1 billion loan from Beijing, bringing to $5 billion in oil-backed loans since 2002.

• Apr. 17—China National Petroleum Corp. enters into a $5 billion financing deal with Kazakhstan's KazMunaiGaz and also will jointly buy oil company MangistauMunaiGas.

Ecuadoran President Rafael Correa said the negotiation with Petrochina will have favorable conditions for his country and that the advance payment will help to ease liquidity problems.

In a television interview, Correa said his country experienced liquidity problems in June and July after repurchasing 91% of its 2012 and 2030 Global bonds.

In addition to the $1 billion advance, Quito is also negotiating with Beijing on a separate $1 billion credit with a 4-year maturity.

While the financial terms of the agreement are considered generally favorable to Ecuador given its economic circumstances, analyst BMI said “the country might yet struggle to meet its supply obligations” since the agreement has taken Petroecuador's contracted commitments to nearly 100% of its output.

Ecuador, which is the fifth-largest producer of oil in South America after Venezuela, Brazil, Argentina, and Colombia, produced 486,000 b/d of oil in May. Petroecuador produces 280,000 b/d, or just over half of Ecuador’s total output of 485,000 b/d.

Contact Eric Watkins at hippalus@yahoo.com.

Ecuador president: financing secured, worst over

GUAYAQUIL, Ecuador, July 24 (Reuters) - Ecuadorean President Rafael Correa said on Friday that his country's financial situation has improved, after securing $2.5 billion in loans and a $1 billion down payment for a contract to export oil to China.

Ecuador has been striving to find alternative sources of financing after defaulting on $3.2 billion worth of sovereign bonds last year, which shut the Andean country off from international capital markets.

"We've been very successful in our search for financing. And part of that financing is the ... sale of oil to Petrochina," Correa said during an interview with a local radio network.

State-run oil company Petroecuador said on Thursday that the country will receive $1 billion in early August as a forward payment for future oil sales to China.

The leftist leader said that multilateral lenders have also agreed to loan Ecuador some $2.5 billion this year.

The Inter-American Development Bank has pledged $1.5 billion, the Andean Development Corporation $500 million and the Latin American Reserve Fund $480 million, said Correa.

"The worst part of the crisis has passed," Correa said, adding that he is confident Ecuador will be one of the few Latin American countries whose economy will grow this year.

Investors have been concerned about Ecuador's ability to finance its budget after it spent an estimated $1 billion to buy the bonds it defaulted on.

Compounding the problem, Ecuador's export revenues fell sharply in the first half of the year due to low oil prices.

The government of Correa, a U.S.-trained economist, needs cash to fund the social projects that have helped him become one of the most popular leaders in Latin America.

Zero tolerance for Colombian rebel groups: Ecuador

Colombia Reports, July 24 2009

Ecuador has "no tolerance" for Colombian rebel groups on its territory, Ecuadorean Minister of Security Miguel Carvajal said on Friday.

The "majority of Colombian guerrilla camps" on the Ecuadorean-Colombian border have been destroyed since 2007, the Minister noted. At least 70 FARC facilities were destroyed in 2007 and around 180 in 2008, mostly monitoring points, laboratories and bases, local media reported.

This demonstrates "a policy of absolute intolerance against Colombian armed groups," Carvajal pointed out.

The minister again questioned the authencity of the FARC video that shows commander 'Mono Jojoy' saying the guerrillas financially supported the 2006 election campaign of Ecuador's President Rafael Correa.

Carvajal also reiterated the possibility that the FARC may have paid money to false co-workers of the election campaign.

The video has worsened the already strained relations between Colombia and Ecuador and has put the Ecuadorean government in a difficult position. The Organization of American States and international police organization Interpol are investigating the tape. According to Colombia's Prosecutor General, Mario Iguaran, there is enough evidence to prove Ecuador's former Minister Gustavo Larrea and former presidential adviser Jose Chauvin were FARC's emissaries in the Correa administration.

Ecuador would defy arbitration ruling for Perenco

July 24, 2009

By JEANNETH VALDIVIESO

Associated Press

QUITO -- Ecuador will defy a World Bank arbitration body if it rules in favor of the Paris-based oil company Perenco SA in a dispute over $357 million in taxes, President Rafael Correa said Thursday.

``We are willing to take this to its ultimate consequences with Perenco. We are not going to let these multinational companies continue to treat us like colonies,'' Correa told Quito-based Sonoram radio.

Perenco is challenging a 2007 increase in Ecuador's windfall profits tax, calling it a unilateral and illegal modification of the company's contracts, which end in 2010 and 2012.

The company filed suit at the Washington-based International Center for Investment Disputes, a body with 143 participating countries, including Ecuador, that is meant to assure investors that governments will not arbitrarily toss out contracts or confiscate property.

Correa says the process infringes on his country's sovereignty and insists he will ignore any ruling in favor of Perenco, which is seeking $430 million in damages.

``We are not going to pay them; their motives are completely contemptible and illegitimate,'' Correa said when asked if he would comply with a ruling that supports the French company.

The leftist president had previously threatened to pull out of the arbitration body, but this was the first time he specifically said he would defy a court ruling on a standing case.

Since March, Ecuador has seized some 70 percent of oil produced daily by Perenco to collect the company's contested back taxes, nearly quadrupling its cut.

The World Bank arbitration body told Ecuador in May to stop collecting the taxes and refrain from canceling the company's contracts until a final ruling in the case is reached. No date is set for the ruling.

Ecuador ignored the order, prompting Perenco to threaten to halt operations. In response, Ecuador last week ordered an affiliate of the state oil company to supervise Perenco's oil fields to guarantee production.

Perenco, which then fired all of its 250 workers in the country, accused the government of orchestrating ``a de facto takeover'' of its oil fields and the French government criticized Ecuador, saying its actions hurt bilateral relations.

Los Angeles-based Occidental Petroleum Corp. also has a suit before the arbitration body challenging Ecuador's 2006 cancellation of its contract.

Ecuador relies on oil exports for 40 percent of its national budget. It has renegotiated energy deals with Spanish oil company Repsol-YPF, China's Andes Petroleum and Brazil's state-run Petrobras SA to boost its share in oil profits by trying to switch to fee-for-service rather than per-barrel contracts.

Ecuador signs oil deal with China

WW4 Report on Thu, 07/23/2009 - 23:19.

Ecuador signed a deal to export some 3 million barrels of crude oil to China through the Petrochina company, with the Andean country to receive $1 billion as an advance payment, the statal Petroecuador announced July 23. The first payment represents 28% of the total value of the oil that Ecuador has agreed to export. Ecuador produced over 485,000 barrels of crude oil per day in May. Quito is also negotiating a $1 billion loan with China, economic minister Diego Borja said earlier this week. (Reuters, July 23)

President Rafael Correa also said July 23 that Ecuador will defy a World Bank arbitration body if it rules in favor of the Paris-based oil company Perenco in a dispute over $357 million in taxes. "We are willing to take this to its ultimate consequences with Perenco. We are not going to let these multinational companies continue to treat us like colonies," Correa told Quito-based Sonoram radio. (AP, July 23)

China's Andes Petroleum already has operations in the Ecuadoran Amazon. Correa has also broached opening the Manta air base on the Pacific to China as a shipping hub after US military forces vacate the site later this year.

Amazon indigenas protest Correa
Meanwhile, the Confederation of Indigenous Nationalities of the Ecuadorian Amazon (CONFENIAE)—composed of the Siona, Secoya, Cofán, Waorani, Shuar, Achuar, Shiwiar, Kichwa, Ando and Zápara nationalities—charging that "the prevailing arrogant and dictatorial political regime of the current Government of President Correa, violates the precepts of Constitutional Rights of the Republic, the principles of the ILO Convention 169, and the rights affirmed in the United Nations Declaration on the Rights of Indigenous Peoples."

The statement further protested that "the regime of Rafael Correa is provoking political and social disorder in the Amazon Region, disregarding Ancestral Territorial Rights of Indigenous Nationalities and Peoples, by the intrusion of military forces and surrender to the national and transnational oil and mining companies of our territories, with a clear plan to [bring about] the looting, subjugation and misery of our communities." (Upside Down World, July 15)

The statement especially rejected Correa's Decree 1780 of June 25, which grants Catholic missions access to Ecuador's Amazon region, to evangelize and establish schools and radio and TV stations. (El Telégrafo, Guayaquil, July 15)

See our last posts on Ecuador and Perenco and the struggle for the Amazon.

Ecuador signs contract to export oil to China

By Eduardo Garcia

QUITO, July 23 - Ecuador has signed a deal to export crude oil to China for which the Andean country is going to receive $1 billion as an advance payment, state-run Petroecuador said on Thursday.

"Petroecuador has signed a supply contract ... with state-run company Petrochina International Company Ltd, for two years," Petroecuador said in a statement adding that Ecuador will receive the $1 billion in the first week of August.

Under the terms of the contract OPEC-member country has agreed to export nearly 3 million barrels of crude oil a month to China, the statement said.

Petroecuador said that the $1 billion represents approximately 28 percent of the total value of the oil that Ecuador has agreed to export to China.

Ecuador produced over 485,000 barrels of crude oil per day in May.

Ecuador is also negotiating a $1 billion loan with China, economic policy minister Diego Borja said earlier this week.

The deals could help the Ecuadorian government inject liquidity into the economy, after export revenues fell sharply in the first half of the year due to low oil prices.

The country needs alternative financing after defaulting on some of its sovereign bonds last year, a move that cut the country off from the international capital markets.

Chile's state-run energy company ENAP said last week that it had signed a deal by which Petroecuador will supply the South American country with 10 million barrels of crude oil per year.

Ecuador Rules out Relation to FARC

Quito, Jul 23 (PL) - Ecuadorian President Rafael Correa ruled out on Thursday any relation to the Revolutionary Armed Forces of Colombia (FARC), and urged the guerrillas to answer if they funded his electoral campaign in 2006.

I am asking the FARC to answer if they funded in any way my electoral campaign, said Correa in an interview by a national television station, referring to a video in which a leader of the guerrillas held they gave funds to him.

It is "a video that has been edited," and I guarantee that Correa has not received a single cent from that group, he said and urged Bogota to publish instead, the recording of the Colombian bombing on an northern area of that country in March, 2008 that led to the breaking-off of the bilateral diplomatic relations.

What is the problem behind? He asked, and answered himself that the problem is to be the neighbor of a country in war, where there is indeed drug-trafficking policy and paramilitary influence on policy.

After questioning the video published in the neighboring country, he recalled that a supposed testament by late Manuel Marulanda, former leader of that rebel group, said Ecuador received funds from the guerrillas and it was denied later by that insurgent group.

I am really tired of those unfounded accusations, he said, and stated that his movement was very careful with the contributions received.

I ask the FARC to answer and say first if that video is true and in second place to which organization it contributed funds, because it was not the Alianza Pais movement, he said.

The president attracted attention on the Colombian stance, because they support the FARC credibility when it is convenient to that government, but it is not so when Bogota is accused of being related to terrorism, the drug-trafficking policy and paramilitarism.

He said categorically that he has never maintained or known any member of that rebel group, with the struggling methods of which he does not agree.

Ecuador to Reform Financial Markets, Boost Trading

By Stephan Kueffner

July 23 (Bloomberg) -- Ecuador plans to reform its financial markets by April, aiming to boost trading of stocks, bonds and other securities to 50 percent of gross domestic product by 2014 from the current 10 percent, said Luis Rosero, a central bank director.

A new bank that will manage the state-owned Ecuadorean Social Security Institute’s assets will play a key role in providing funds and liquidity to the market, Rosero said in an interview in Quito.

“The important thing is for the market to increase investment and achieve sustained growth,” Rosero said. “That’s the fundamental goal.”

The central bank is helping to draft legislation to modernize the markets, demutualizing the stock markets in Guayaquil and Quito and strengthening regulations to increase transparency. President Rafael Correa’s plans to double taxes on capital outflows to 2 percent and to tax dividends will make it hard for the reforms to lure capital, said Sebastian Caviedes, an economist at Humboldt Management in Quito.

“A new tax on income from dividends puts a new entrance barrier, which is negative for a market as little developed as Ecuador,” Caviedes said.

Rosero said the central bank is aware that the tax increase plan may conflict with the push to deepen financial markets. The bank is working with Ecuador’s tax service to try to prevent taxes from undermining the plan, he said. Correa defaulted on $3.2 billion of bonds in December and March, saying the securities had been issued illegally.

Ecuador’s Social Security Institute had $5.06 billion in investments as of April 30. The bank planned to manage the institute’s money -- to be known as the “Affiliate’s Bank” -- will channel the funds into long-term investments that banks haven’t made because of a focus on short-term, money market investments, Rosero said.

Ecuador Had Liquidity Problems Due To Debt Repurchase: Correa

QUITO July 23 (Dow Jones)--Ecuador's liquidity problems in June and July were due to its repurchase of more than 90% of its 2012 and 2030 Global bonds, President Rafael Correa said Thursday.

"We had liquidity problems because of the repurchase of the debt," Correa said in a televised interview. "We repurchased 91% and that means that we had to spend $900 million in a few months, while we had budgeted $400 million."

On April 20, the government launched a modified Dutch auction for its defaulted 2012 and 2030 Global bonds and offered a minimum price of 30 cents on the U.S. dollar to repurchase those global bonds. But on May 26, it announced that it had set a price of 35 cents on the dollar.

Ecuador had three overseas bond issues outstanding: $510 million in bonds due 2012, which carry a 12% coupon; $650 million of 9.375% bonds due 2015; and $2.7 billion of 10% bonds due 2030.

According the government, it had spent about $900 million on the bond buyback and had repurchased $2.9 billion worth of the debt.

Correa said that amid the liquidity problems there were some delays in the payment of public sector wages.

The meager liquidity available to the country, as well as the limited sources for external financing, which has been reduced to mainly regional multilateral lenders, will be a deciding factor in a decline in Ecuador's economic activity, analysts say. However, Ecuador's government has forecast gross domestic product growth of around 2% this year.

Ecuador's Correa asks FARC to validate thorny video

QUITO, July 23 (Reuters) - Ecuadorean President Rafael Correa asked the Colombian guerrilla group FARC on Thursday to affirm the authenticity of a video in which a rebel leader says the group gave funds to Correa's presidential campaign.

Leftist Correa says the video, which was released last week, was a setup and has denied receiving funds from the Revolutionary Armed Forces of Colombia, or FARC.

"I ask the FARC, directly, publicly, to say whether the video is for real or not, to say whether they gave money to Rafael Correa's campaign, and who they gave the money to," Correa said in an interview with a local TV network.

The video, in which a top rebel commander says the FARC gave money to Correa's campaign, has heightened tensions between the Andean neighbors.

Ecuador cut off diplomatic ties with Colombia after the Colombian army bombed a FARC base on Ecuador's side of the border in March 2008.

Colombia's conservative leader, Alvaro Uribe, accuses Ecuador of not doing enough to help combat the FARC while Correa says Colombia is using the video to try to destabilize his progressive government.

Former Ecuador Minister and presidential adviser were FARC emissaries: Colombia

Colombia Reports, 23 July 2009

Colombia's Prosecutor General said Wednesday former Security Minister of Ecuador, Gustavo Larrea, and the country's former presidential adviser Jose Chauvin were emissaries of the FARC within the Ecuadorean government.

According to PG Mario Iguaran there is enough evidence that prove the two officials had extensive links to Colombia's largest guerrilla group.

After the march 2008 attack on the camp of FARC commander Raul Reyes just over the Ecuadorean border, an increasing amount of evidence was found that prove contacts between the leftist Correa administration and the rebels.

Iguarán told television network Canal Caracol the former presidential adviser was called 'Nacho' in FARC communication and that evidence allows Colombian prosecutors "to conclude or reasonably indicate that this mister Jose Ignacio Chauvin, alias 'Nacho' according to Raul Reyes, was the connection, the emmisary of the FARC."

The evidence gathered "also allows us to reasonably indicate that mister Gustavo Larrea, alias 'Juan' according to Raul Reyes, was an emissary of the FARC.

Chauvin denies any links to Colombia's largest guerrilla group. "I was never chosen by the Ecuadorean government to talk to the FARC and I never received a penny of the FARC and I would never receive one," the former presidential adviser said at a press conference.

Ecuador and Colombia have strained ties after the attack on the camp of Reyes. The situation worsened the past week after Colombia showed a video of FARC commander ''Mono Jojoy'confirming the guerrillas financially supported the 2006 campaign of leftist President Rafael Correa.

Ecuador's president denies links to the FARC and alleges a media campaign against him

Knight Centre for Journalism in the Americas

President Rafael Correa said a video in which the top leader of the FARC guerrilla group admits to financing Correa’s 2006 electoral campaign is a “montage.” He described it as part of an operation to weaken several Latin American governments, the Associated Press reports.

Correa used his Saturday radio program to denounce the campaign against his government, BBC Mundo says. “There is an all-out attack in the region from the right that is using weapons, among them media weapons, in an attempt to destabilize progressive governments,” the leader said.

Correa has called for an investigation of the footage. “We have a clear conscience…We will go over this video. There have been other montages,” he said, quoted by El Comercio.

Maybe FARC paid money to fake Correa aides: Ecuador

Colombia Reports, 21 July 2009

Colombia's biggest rebel group the FARC may have paid money to false co-workers of the 2006 election campaign of Ecuador President Rafael Correa, an Ecuadorean minister said Tuesday.

"This is a possibility, of course. Anyone ... can say: I'm close to the campaign of Rafael Correa, give me money," Minister of Politics, Ricardo Patiño said on a press conference.

Patiño urged the FARC to clarify the content of a video wherein FARC commander Mono Jojoy tells a group of guerrilla the FARC financially supported the 2006 presidential campaign of Correa.

"To say it clearly: whoever they [the FARC] gave money to, if they gave some money we are going to prosecute this person to return the money or to explain where they put it [the money], because they didn't pay it to our campaign," the minister said.

Patiño also reiterated the statement of President Correa who said that the video is fake and part of an international conspiracy to discredit leftist governments in Latin America.

Ecuador in renewed hydro push, sees S Korea engagement

Water Power, 21 July 2009

The Government of Ecuador said that hydro power studies on the Zamora river are to be undertaken by Hyundai Engineering and Construction of South Korea.

Separately, the Government added, negotiations are underway with Korea Electric Power Corp (Kepco) on two hydro power schemes - Chontal (100MW) and Villadora (280MW) - both of which are in the Guayllabamba river basin.

A renewed focus on hydro power development has been emphasised by the new Minister of Electricity and Renewable Energy, Esteban Albornoz. He cited the importance of projects such as Sopladora, Coca Codo Sinclair, Cardenillo, Toachi-Pilaton and Ocana.

The Zamora catchment could have up to 4GW of hydro power potential, according to studies by the former national Institute for Electrification (INECEL). In May, the Government received seven bids to undertake a new study and the work is to be done by Hyundai.

The Government wants to have approximately 2GW of hydro power capacity developed in the lower part of the Zamora watershed by 2017.

Potential projects on the Zamora river include Gualaquiza (830MW) and San Antonio (714MW).

The Sopladora scheme, in the Paute river basin, could have up to 400MW of capacity and a development budget of approximately US$400M was previously cited.

The Government has noted that the Cardenillo scheme, also in the Paute catchment, could have a capacity of 327MW.

The biggest project earmarked for development is the 1.5GW Coca Codo Sinclair scheme, and the development cost has been estimated to be approximately US$1.6B.

Toachi-Pilaton could be 228MW and other projects have, previously, also been mentioned for development, such as Minas Jubones (335MW), Chespi (167MW), Baeza (60MW) and Quijos (50MW).

The projects were mentioned two years ago in the Government's plan to invest about US$300M annually in hydro power development.

The Ocana (26MW) project is one of two under development by utility ElecAustro, the other being Soldados-Yanuncay-Minas (27.8MW).

Other projects that have been listed in the past for possible development include: the El Chaco scheme, comprising two plants of 506MW and 89MW, respectively; and, Borja (350MW) and Balsas (407MW) on the river Quijos.

Ecuador President Rafael Correa calls FARC video a 'sham'

The newly released footage shows a Colombian rebel commander discussing contributing money to Correa's 2006 election campaign.

Associated Press

July 19, 2009

Quito, Ecuador -- Ecuadorean President Rafael Correa on Saturday dismissed as a "sham" a newly released video in which a Colombian rebel commander discusses contributing money to Correa's 2006 election campaign.

The video, whose existence was revealed by the Associated Press on Friday, appears to lend credibility to allegations that the leftist Revolutionary Armed Forces of Colombia contributed to the Correa campaign.

In his weekly Saturday radio program, Correa said he had "nothing to do with the FARC," and he said the video's release was part of a campaign by the political right to destabilize his government.

"It's all a sham to damage the image of the country and the image of the government," he said.

Correa said that a government-backed commission investigating Colombia's March 2008 attack on a FARC camp just inside Ecuador should also analyze what he termed "the idiocy" of allegations that rebels contributed to his presidential campaign. He said the commission could report "if we have ever had any contact with the FARC."

"I personally don't know anyone in the FARC," Correa said.

The video, found by police on the computer of an alleged rebel, shows the FARC's No. 2 commander, Jorge Briceno, reading from the deathbed manifesto of the rebels' founding leader, Pedro Antonio Marin, also known as Manuel Marulanda, who died March 26, 2008. The manifesto laments that Colombian troops had seized electronic documents that compromised the rebels and their foreign friends -- namely, Correa and President Hugo Chavez of Venezuela.

Correa has accused Colombia of fabricating the documents, though an inquiry by the global police agency Interpol determined they were not altered.

Ecuador broke diplomatic ties with Colombia over the raid last year, in which a top FARC leader, Raul Reyes, was slain along with 24 others.

Ecuador leader denies Farc funds

BBC, July 19, 2009

The videotape shows Mono Jojoy addressing his troops President Rafael Correa of Ecuador has denied allegations that he received election funds from Marxist Farc rebels in neighbouring Colombia. He said evidence had been fabricated to destabilise his left-wing government. A video broadcast on Colombian television on Friday appeared to show a Farc leader saying he had contributed to Mr Correa's 2006 campaign. The two countries broke off diplomatic ties last year after Colombian troops raided a rebel base in Ecuador. The hour-long video was delivered to the offices of the Associated Press news agency by an unnamed Colombian government official and was later broadcast on national television. AP said it was found on a computer seized in May in the Bogota home of a suspected Farc operative, and was decrypted last week. It allegedly shows Jorge Briceno addressing his troops after the death last March of the Farc's founder Manuel Marulanda. Mr Briceno speaks of money delivered to the 2006 election campaign of Ecuador's President Rafael Correa as well as meetings with his emissaries. 'Destabilisation' Mr Correa at first dismissed the video as a "sham". "I personally don't know anyone in the Farc," he said. The Ecuadorean president added that the release was part of a campaign by conservative groups "to destabilise the region's progressive governments". "I can also go, now, and get a recording where the paramilitaries say that they financed the campaign of [Colombian President] Alvaro Uribe or of drug traffickers saying that they financed Alvaro Uribe's campaign," he added. Analysts say that even if the videotape is genuine, it does not prove that Mr Correa personally had any knowledge of contacts with the rebels. Relations between the two nations have worsened recently with an Ecuadorean court seeking the arrest of the former Colombian defence minister who had ordered the raid into Ecuador. Ecuador is also imposing tariffs on Colombian exports.

Ecuador unlikely to nationalize oil sector

QUITO (Reuters) - Although Ecuador seized control of Perenco’s oil fields over a tax dispute, the OPEC nation is unlikely to nationalize petroleum companies while it seeks to renegotiate contracts in a bid to increase revenue.

The leftist government of Rafael Correa, a key ally of Hugo Chavez, who has nationalized scores of energy companies as president of Venezuela, seized control of Perenco’s operations on Thursday.

But analysts and oil executives say the move does not signal a desire from Correa to tighten the state’s grip on the oil industry, the country’s biggest revenue earner.

“Correa is not looking for a wholesale nationalization of the oil sector. But he is showing, that when push comes to shove, he is willing to take over the assets of companies that do not go along with his government,” said Patrick Esteruelas, analyst at the Eurasia Group consultancy in New York.

Although close aides describe Correa as “stubborn” and unpredictable, they also say that he is pragmatic and unlikely to press foreign investors too hard, because he knows that the economy could suffer.

However, RoseAnne Franco, lead analyst for Latin America at Country Strategies PFC Energy, said Correa was likely to keep introducing reforms that may alienate investors.

“While the Correa Administration attempts to shy away from outright nationalization, Quito’s efforts to maximize oil revenues are resulting in piecemeal nationalization, triggering the same consternation among foreign companies,” she said.

The government of Correa, a US-trained economist, needs cash to fund the social projects that have helped him become one of the most popular leaders in Latin America. And he wants oil companies to chip in.

Ecuador is negotiating new operating contracts with foreign investors including Spain’s Repsol-YPF, Brazil’s Petrobras and Andes Petroleum which is controlled by China’s National Petroleum Corp.

Ecuador also wants to negotiate a contract with a group of foreign oil companies, including Repsol and Petrobras, that control a key oil pipeline because he says they have been evading taxes.

“The administration has two heads fighting for power, one controlled by the government, which wants more money, and a second head controlled by Petroecuador, which wants more sway over oil production,” former energy minister Rene Ortiz told Reuters.

He said that “there is a high risk” that the government ends up seizing more operations if Petroecuador wins the internal struggle that it has with some government ministers.

The government is also giving more funds to Petroecuador, which this week raised its investment budged for this year by almost 60 percent to $1.7 billion and has landed supply deals with China and Chile.

Last weekend Correa announced that the country is soon to receive a down payment of $1 billion for future oil sales to China, and on Thursday state-run Chilean company ENAP said that Petroecuador will supply the energy-poor South American country with 10 million barrels of crude oil per year.

The deals could help the Ecuadorean government to inject liquidity into the economy, after export revenues fell sharply in the first half of the year due to oil prices.

The country needs alternative financing after defaulting on some of its sovereign bonds last year, a move to cut the country off from the international capital markets.

Last year all foreign oil companies operating in Ecuador but Perenco signed temporary deals with Ecuador and agreed to renegotiate new contracts within 12 months.

Correa wants the companies to sign service contracts, by which the companies will extract oil in exchange for a per-barrel fee.

Correa Says Commission Will Investigate Alleged FARC Influence

By Stephan Kueffner

July 18 (Bloomberg) -- Ecuadorean President Rafael Correa said an investigation into a Colombian raid inside Ecuador also will probe allegations of ties between the Revolutionary Armed Forces of Colombia and Correa’s government and political party.

Correa said a commission reviewing last year’s attack on a camp set up by the FARC, as the rebel group is known, near Angostura in Ecuador’s Amazon territory will investigate whether the rebels contributed to his 2006 election campaign.

“They can investigate whether the candidate or campaign ever got as much as 20 cents from the FARC or any other foreign source,” Correa said today in his regular Saturday radio-and- television broadcast.

Correa made the comments in response to the release by the Associated Press yesterday of a video showing the group’s second-in-command saying the FARC had contributed to his campaign. The video shows Jorge Briceno, known by his alias of Mono Jojoy, telling a group of rebels that the FARC provided “assistance in dollars to Correa’s campaign,” AP reported.

Documents the Colombian military found on a laptop during the Angostura raid show evidence of payments of at least $100,000, the news service added.

Correa has said any contact his government has had with the FARC was for strictly humanitarian reasons related to the release of hostages. Today he reiterated that he has never met anyone from the FARC. Ecuador’s Security Minister Miguel Carvajal said yesterday neither the government nor the campaign received any funds from the guerrilla group.

Colombian police found the video in the computer of an alleged rebel arrested in May, AP said.

Former president of Ecuador wants Correa to resign and be arrested

Colombia Reports, July 18

The former president of Ecuador, Lucio Gutierrez, wants his successor Rafael Correa to resign and be arrested, because of the "clear evidence" the current President received money from Colombia's largest rebel group FARC in his 2006 campaign.

Correa has come under pressure after news agency AP showed a video wherein FARC commander 'Mono Jojoy' confirmed Colombian accusations that the guerrilla group financially supported Correa while running for the 2006 presidency.

"The video is authentic," Gutierrez said in an interview with Canal UNO, adding that the recording has "outraged the Ecuadorans."

"Faced with so much indignation, we demand the resignation of Rafael Correa, .... he has to resign and the competent authorities have to issue an arrest warrant against him," said Gutierrez.

"People are wondering where he got that [money for] a multimillion dollar campaign," the former Head of State said, adding that using "dirty and blood-stained money" Correa "committed electoral fraud" in the April elections he lost to Correa.

Correa himself says the video is fake and is part of a "systematic campaign" to "destabilize progressive government."

"Let them investigate the stupidity that they showed yesterday [as part as] this campaign that, not just on Ecuadorean-Colombian level, but on a regional level, where there is an onslaught of the right wing and all their instruments and weapons, among them the media, to destabilize the progressive governments."

Correa's administration appointed a commission to research the video wherein FARC commander Mono Jojoy tells a group of guerrilla the FARC financially supported the 2006 presidential campaign of Correa, something the Colombian government had said for more than a year.

The commission will investigate both the Colombian bombing of a FARC camp on Ecuadorean soil on March 1, 2008 as the information gathered from computers found in that camp and that was shown in the 'Mono Jojoy' video, Correa said.

"They can investigate whether the candidate or campaign ever got as much as 20 cents from the FARC or any other foreign source," he added.

Meanwhile, the Colombian government made no official statements following the controversy the video generated.

Ecuador Battling Illegal Loggers from Neighboring Peru

QUITO – The Ecuadorian Environment Ministry announced Thursday that officials, troops and police dismantled an illegal camp of Peruvian lawyers in a protected zone near the border, the fourth such outpost destroyed in less than a month.

In the operation, conducted last weekend, authorities found hundreds of logs of dressed timber of different species, among them cedar, cinnamon, coconut and several others, the ministry said in a communique.

The wood was found loaded on wagons for transport via a small river that runs by the Tagaeri-Taromenani reserve.

The reserve is in the southern part of the Yasuni National Park, where uncontacted indigenous peoples live and where all extractive activities like logging or oil pumping are prohibited “in perpetuity.”

Other activities are prohibited also, including “intrusive ones like colonization, scientific research or missionary work.”

In the operation, authorities arrested eight loggers who were intending to take “the product of three months of work to intermediaries who sell it” in Iquitos, Peru.

The ministry said the illegal loggers earn approximately $3 per day for their work, while one of the logs can be sold by the lumber merchants at its final destination for at much as $200.

In addition, it said that the area where the loggers had penetrated is “a very rugged zone on the border that encompasses Ecuadorian as well as Peruvian territory.”

“In the neighboring country, the logging of wood on this scale is not illegal and, according to their statements, the loggers did not know they were in Ecuadorian territory since this sector of the border is an imaginary line lacking any markings,” the text added.

On July 6, three other similar camps were destroyed in the same sector and the occupants were captured and turned over to military authorities on the border, the ministry said.

“The presence of these groups places at risk the survival of the isolated indigenous peoples who live in these border zones and for whom the Ecuadorian government is conducting actions for their ... protection,” the communique said.

In that task, the Environment Ministry is working with the Foreign Ministry on the possibility of asking for “coordination of control activities” on illegal logging between Ecuadorian and Peruvian authorities. EFE

Perenco says Ecuador "expropriated" oil fields

By Alexandra Valencia

QUITO (Reuters - July 16) - French oil company Perenco said on Thursday that the Ecuadorian government had "confiscated" its operations in the South American country over a tax dispute, a claim denied by the government.

"What they did was to take control of the installations, the fields, and the operations ... that's called expropriation," Perenco's Latin American manager Rodrigo Marquez told Reuters.

The government said in a statement that officials from state-run oil company Petroecuador only went to the blocks controlled by Perenco to "make sure that they were (producing) normally," because Perenco had threatened to halt operations in Ecuador starting on Thursday.

"The workers did not receive an order (to halt production). Everything is normal (in the oil fields)," a spokesman from state-run oil company Petroecuador told Reuters.

Perenco had a very different take on the situation.

"They (Petroecuador officials) spoke with the workers and told them clearly that they were taking control," Marquez said.

Leftist Ecuadorian President Rafael Correa, an ally of Venezuelan leader Hugo Chavez, is trying to increase state revenue from the key oil sector, but has so far shied away from nationalizing oil companies.

His government has seized the bulk of Perenco's production since March in a bid to collect more than $350 million it says the company owes in windfall taxes.

Perenco extracts 22,000 barrels of oil per day from two blocks in Ecuador's Amazon jungle, or around 4.5 percent of the country's total output, which amounted to 486,000 barrels per day in May.

The Ecuadorian government had previously said that it was not going to allow Perenco to halt output.

The Petroecuador spokesman on Thursday said that officials were "not going to take measures" against the company because output had not been disrupted.

The government is trying to sell some 2 million barrels of oil confiscated from Perenco, and the only bidder so far has been Petroecuador.

Burlington Resources, a subsidiary of ConocoPhillips (COP.N), has stakes in the two blocks operated by Perenco in Ecuador.

Perenco launched a suit against Ecuador and Petroecuador last year to dispute the legality of the windfall tax, saying the levy violates its contract.

The World Bank's International Center for Settlement of Investment Disputes accepted a request from Perenco in May to block any forceful collections until the center rules on the legality of the windfall tax.

Ecuador hiked the tax to 99 percent from 50 percent in 2007 as a way to pressure foreign oil companies to rework their extraction deals, but later lowered the tax to 70 percent.

Ecuador:Petroecuador Plans Investments Of $18 Bln Through 2015

QUITO (Dow Jones - July 16)--Ecuador's state-owned oil company Petroecuador plans to make investments of around $18 billion through 2015 in an effort to reverse a decline in its oil output and improve the company's performance.

According the Petroecuador's investment plan for the period 2009-15, around 55% of the investments will be allocated for a new refinery complex, some 8% for production and 7% for oil infrastructure.

Petroecuador is the majority shareholder in the joint-venture Refineria del Pacifico-CEM, set up with Petroleos de Venezuela, or PdVSA, for the refinery complex. Petroecuador holds a 51% stake in the venture, while PdVSA has 49%.

The construction company chosen for the project will be expected to finance 70% of the refinery's cost, with the remaining 30% financed by PdVSA and Petroecuador.

Refineria del Pacifico will be built in Ecuador's coastal province of Manabi. It is projected to begin operations in 2013 and process 300,000 barrels of crude a day. President Rafael Correa has said that construction of the project will start next year.

The new refinery is important for Ecuador, which has to import processed petroleum products such as gasoline because of a lack of refining capacity. Many of the Ecuador's new oil discoveries are heavy crude, which can't be processed at the country's three existing light-crude refineries.

Petroecuador President Luis Jaramillo said that the company will negotiate joint ventures with foreign state companies for financing Petroecuador's projects. Early this year, he said that Petroecuador is negotiating joint ventures with China Petroleum & Chemical Corp. (SNP), known as Sinopec, along with state companies from Angola, among others.

Ecuador rejects provocative charges against Correa by Colombia

Colombia Reports, July 8, 2009

Ecuador rejects the legal actions of Colombian lawyers against Ecuadorean President Rafael Correa for his alleged links to the FARC. It "only deepens the political differences between the two countries", Ecuador's Foreign Minister said Wednesday.

The denouncement against Correa is only a "political action" in response to the arrest warrant against Colombia's former Defense Minister Juan Manuel Santos, Ecuadorean Foreign Minister Fando Falconi claimed.

Ecuador is a peaceful country which respects human rights. Ecuador is firmly committed to peaceful settlement of disputes and to International Law, Falconi said. "We have never assaulted the Republic of Colombia in any way. But Colombia assaulted Ecuador by bombing our territory without permission."

Falconi added that "Ecuador has suffered many attacks by the Colombian government and rebel groups [...] and it will not allow that somebody from outside intends to restrict the right to seek truth and justice. The arrest warrant against a Colombian citizen [Santos] is part of a legitimate judicial process which complies with all legal and constitutional requirements of due process. Ecuador will continue its course without interference."

Ever since the March, 2008 bombing, the diplomatic relations between Colombia and Ecuador are tense.

First, Ecuador sued Colombia for the death of Ecuadorean citizen Franklin Aisalla during the bombing of the FARC camp on Ecuadorean territory last year, claiming that it was an extrajudicial execution carried out by the Colombian military. Colombia denied its responsibility.

Then, an Ecuadorean judge issued an arrest warrant against Santos for being responsible for the bombing. Colombia's President Alvaro Uribe heavily rejected the arrest warrant saying that the judge is a terrorist ally and staging a coup in Colombia.

Ecuador demands 'respect' from Colombia

Colombia Reports, July 7, 2009

Ecuador demands "respect" from Colombia before fractured diplomatic relations can be repaired, Security Minister Miguel Carvajal said Tuesday.

The country views Colombia's denouncement of Ecuadorean President Rafael Correa for his alleged links to the FARC as "political" not judicial.

"This is a country that deserves and demands respect," said Carvajal. He added that he hoped Ecuador's relations with Colombia "don't deteriorate more".

Colombian investigators allegedly found emails from Correa to slain FARC leader "Raul Reyes" on a computer seized after the Colombian military bombed a FARC camp just over the Ecuadorean border on 1 March, 2008.

The Minister said accusations of FARC ties against Correa were "political reactions" to Ecuador's order to arrest former Colombian Defense Minister Juan Manuel Santos.

Ecuador says Santos is responsible for the bombing of the FARC camp, in which 25, including 'Raul Reyes' and Ecuadorean citizen Franklin Aisalla died.

The incident led to the breakdown in diplomatic relations between the two countries.

Interpol recently turned down a petition from Ecuador to put Santos on the international police's list of wanted persons.

Colombian President Alvaro Uribe reacted strongly to allegations against Santos, calling the judge who ordered the arrest a "terrorist ally entrenched in Ecuadorean justice."

Ecuador to End Correa Brother’s Contracts to ‘Restore Faith’

By Stephan Kueffner

July 4 (Bloomberg) -- Ecuador’s President Rafael Correa said his administration will unilaterally rescind government contracts with companies controlled by his brother Fabricio, a Guayaquil-based entrepreneur.

An end to the contracts, valued at at least $80 million with state-owned oil company PetroEcuador and other public companies, is the best way to show the integrity of his administration, Correa said today in his regular Saturday radio- and-television broadcast.

“This is necessary to re-establish the public faith,” Correa said. “I never let him into the inner circle of decision making.”

Fabricio Correa, in a radio interview yesterday with local newswire Ecuador Inmediato, said that he didn’t break the constitution, which prohibits relatives of high-ranking government officials from doing business with the state. He said he is only a partner in companies that won contracts through public tenders.

“I have no privileged information,” Fabricio Correa said in the interview. “I have the right to work legitimately.”

Attempts by Bloomberg News to contact Fabricio Correa or his lawyer were unsuccessful.

Ecuador quits World Bank arbitration tribunal

QUITO, July 2 (Reuters) - Ecuador has withdrawn from the World Bank body that arbitrates between countries and private companies, the government said on Thursday, becoming the second South American country to do so in two years.

Leftist Ecuadorean President Rafael Correa issued a decree "condemning and therefore terminating the Convention on the Settlement of Investment Disputes between States and Nationals of Other States."

Ecuador joined the World Bank's International Center for Investment Disputes, ICSID, in 1986, allowing foreign investors to file for arbitration at the institution if they disagreed with the country's policies.

Bolivia pulled out from the ICSID in late 2007 after the government officially accused it of favoring multinational companies in its rulings.

Correa, who is striving to exercise greater control over the economy, has lashed out at the ICSID in the past for considering demands from oil companies operating in Ecuador, including Spain's Repsol-YPF (REP.MC: Quote, Profile, Research) and France's Perenco.

He has even threatened companies with expulsion from the OPEC nation if they file for arbitration at the ICSID.

US-ECUADOR: Chevron Fails in Effort to Lift Trade Benefits

By Jim Lobe*

WASHINGTON, Jul 2 (IPS) - In the latest in a string of setbacks that could cost the U.S. oil giant Chevron billions of dollars in damages, President Barack Obama decided this week to extend trade preferences for Ecuadorean exports for another six months under the 1991 Andean Trade Preferences Act (ATPA).

Chevron, which is waiting for an Ecuadorean judge to rule on a pending 27-billion-dollar class-action environmental lawsuit, conducted a high-powered lobbying campaign to persuade the Obama administration to cancel the preferences as a way of exerting leverage over the government of President Rafael Correa to settle the case on favourable terms.

But, while he suggested Washington was concerned about a possible "politicisation" of the case, Obama stated in a message to Congress that Ecuador had not violated any legal requirements that would render it ineligible for ATPA benefits.

"Concerns have been raised that statements by top Ecuadorian officials in favor of the plaintiffs have politicized the proceedings," the message, which was prepared by the Office of the U.S. Trade Representative's (USTR). "The U.S. Government has encouraged Ecuadorian government officials to refrain from commenting on ongoing judicial cases."

While Chevron offered no public reaction to the extension, major business groups of which it is a member welcomed the wording of the report, claiming that it signaled growing concern here about Ecuador's treatment of foreign investors.

"We welcome the increased scrutiny of Ecuador's eligibility going forward," said Myron Brilliant, senior vice president for international affairs at the U.S. Chamber of Commerce, who claimed that U.S. investors "have faced an increasingly hostile environment in Ecuador and Bolivia".

Bolivia has been denied ATPA benefits since the administration of U.S. President George W. Bush determined late last year that that it was not cooperating adequately with Washington's counter-drug efforts, a condition for eligibility.

Obama determined that La Paz has continued to fall short on that front and extended its suspension from the programme, drawing a sharp protest from President Evo Morales who accused the U.S. president acting like a "boss" toward Latin American countries.

"With much respect, I want to tell President Obama: while in the United States the faces of the leaders have changed, the policies of the empire have not changed," he said.

Obama's decision to extend Ecuador's benefits until at least the end of the year marks another reversal for Chevron in what the New York Times recently called "the world's largest environmental lawsuit".

Earlier in the week, the U.S. Supreme Court announced that it would not overturn a federal judge's ruling that Chevron could not compel Petroecuador, the state company that partnered with Chevron in the affected area, to join negotiations to settle the lawsuit because the two companies had never formally signed a joint operating agreement.

The case was first filed in the U.S. federal court in 1993 on behalf of 30,000 mostly indigenous residents of the Lago Agrio region of the Ecuadorean Amazon where Texaco, which was acquired by Chevron in 2001, had operated continuously from the 1960s until 1992. For much of that period, it worked in partnership with Petroecuador, which took over all of Texaco's operations in the region when the U.S. oil giant left.

The plaintiffs claim that Texaco dumped more than 70 billion litres of toxic liquids, left some 910 waste pits filled with toxic sludge, and flared millions of cubic metres of toxic gases – poisoning the environment in one of the most biologically diverse areas in South America and creating serious health problems, including an unusually high incidence of cancer, for people in the region.

Apparently concerned that U.S. courts would be more sympathetic to the plaintiffs' case, Texaco persuaded Judge Jed Rakoff to have the case transferred to Ecuador, then ruled by a conservative government eager for foreign investment, in 2002 on the condition that the company waive certain defences, such as the expiration of the statute of limitations, and ensure that any judgement would be enforceable in the U.S.

Chevron has long argued that the damages cited by the plaintiffs are exaggerated and that, in any case, Texaco extinguished its obligations when it carried out a 40-million- dollar environmental remediation project as part of a 1995 agreement with the Ecuadorean government that covered 37.5 percent of the well sites and waste pits in the concession area.

The remaining sites were to be cleaned up by Petroecuador, according to Chevron.

But the plaintiffs, who are backed by a number of local and international green groups, have argued that Chevron, having drilled all of the original sites, also remains responsible for Petroecuador's portion, as well as for the continuing health and other impacts of its operations that are not covered by the 1995 agreement.

Ecuadorean officials, including Nunez himself, have indeed openly expressed sympathy for the plaintiffs' case, and President Correa has called the damages caused by the company's operations a "crime against humanity".

Chevron and its lobbyists, including former USTRs Mickey Kantor and Carla Hills, have used those statements to press the company's case both in Congress and with the administration that it can no longer get a fair trial in Ecuador and that trade preferences should be denied unless the government intervened to stop it.

That effort has also included the production and distribution of a 14-minute video by the company to counter a negative report by CBS' "60 Minutes" public-affairs programme that is viewed weekly by some 12 million people. The company's sponsorship of the video, which purports to be objective journalism and is narrated by a well-known former CNN reporter, was exposed by the Times and appears to have backfired.

"Chevron's lobbying effort was based on the theory that Ecuador's president could be forced to violate his country's Constitution by interfering in a private litigation," said Steven Donziger, one of the plaintiffs' legal advisers. "By engaging in these heavy-handed tactics reminiscent of the worst days of Uncle Sam, Chevron has damaged its own image and that of other U.S. investors in Latin America."

Several Democratic lawmakers have also tried to counter Chevron's lobbying efforts. In a letter to USTR Ron Kirk last week, four senators urged him to "allow the legal proceedings in Ecuador to take their course with any undue intervention from the U.S. government."

Similarly, Reps. Jim McGovern and Joe Sestak wrote a letter to Kirk in which they called on him not to "interfere in this judicial matter, particularly when this case involves environmental, health and human rights issues that have regional, and even global, importance."

Kirk and the Obama administration appear for now to be following that advice, although Chevron does not lack for powerful friends in Congress, which will likely have to vote on whether to extend ATPA before it expires at the end of the year.

*Jim Lobe's blog on U.S. foreign policy can be read at http://www.ips.org/blog/jimlobe/.

Latin American Parliament Meets in Ecuador

Quito - Latin American Parliament leaders meet Wednesday in this capital to evaluate the democratic crisis gripping Honduras and possible consequences for the region.

Fernando Cordero, chairman of the Ecuadorian Legislative Commission, stated Tuesday that participants in this special meeting will adopt actions for the return of democracy in the Central American nation and Latin America.

"The recent military coup perpetrated in the brother Republic of Honduras is, undoubtedly, an abominable action that not only affects the noble Honduran people, but also the international community in general," Cordero stressed.

The Assembly's top representative noted this military coup in Honduras also works against the gradual processes of change underway in the Americas.

"I think this brutal coup against the legitimately constituted government of President Manuel Zelaya deserves open condemnation from parliaments of our region," he noted.

"We are also going to examine the role of those bodies in the resolution of conflicts and approve a final declaration at the end of the event," the top legislative pointed out.

Parliament leaders from Argentina, Chile, Cuba, Venezuela, Mexico and Bolivia have so far confirmed their attendance to this forum.

Top representatives from the Andean Legislature, the Latin American Parliament, the Inter-Parliamentary Forum of the Americas, the Parliamentary Confederation of the Americas, the Central American Parliament and Indigenous Parliament of the Americas are invited to this meeting, to be run until Thursday.

U.S. Supreme Court Refuses to Hear Chevron Appeal Over $27 Billion Ecuador Environmental Case

Amazon Defense Coalition

FOR IMMEDIATE RELEASE

2009-06-29

Karen Hinton at 703-798-3109 or karen [at] hintoncommunications.com
Mitch Anderson at 415-342-4783 or mitch [at] amazonwatch.org

U.S. Supreme Court Refuses to Hear Chevron Appeal Over $27 Billion Ecuador Environmental Case

Latest in Series of Legal Setbacks for Oil Giant

WASHINGTON – The U.S. Supreme Court today refused to hear an appeal by Chevron of a decision by a U.S. federal trial judge that denied the oil giant's attempt to shift a $27.3 billion liability for environmental contamination in the Amazon rainforest to Ecuador's state-owned oil company.

The Supreme Court's move is the latest of several legal and political setbacks recently suffered by Chevron in the 16-year-old case, considered the largest environmental matter in the world. Experts have dubbed the contamination in Ecuador the "Amazon Chernobyl" and say a clean-up would dwarf any decontamination effort ever undertaken.

The dispute before the Court was between Chevron and Ecuador's government, but it was spawned by a private lawsuit for environmental damages brought against Chevron by thousands of private citizens in the country's Amazon region.

Damages in the private lawsuit, expected to end later this year, were estimated in 2008 at up to $27.3 billion by a team of court-appointed experts. Texaco (now Chevron) is accused of dumping billions of gallons of toxin-laden waste water into the Amazon rainforest from 1964 to 1990, when it operated a large oil concession in the area covering a 2,000 square mile area.

Indigenous groups complain their cultures have been decimated, while the Ecuador court report found high cancer rates related to oil contamination have caused roughly 1,400 excess deaths.

Chevron was challenging an order by U.S. federal district court judge Leonard B. Sand that denied its attempt to obligate Ecuador's government to take part in a binding arbitration over the liability from the private lawsuit based on a provision in a 1965 contract signed by Texaco and Gulf to operate a large oil concession in Ecuador's rainforest. Last October, a unanimous three-judge panel for the U.S. Court of Appeals for the Second Circuit found Chevron's argument was "without merit" and denied its appeal, prompting the petition to the Supreme Court.

The narrow legal issue involved whether Ecuador's government could be subject to an arbitration provision under a contract that it never signed, and whose only signatories were two American oil companies. The implications of any arbitration between Chevron and Ecuador's government would have been highly significant given the amount of damages, however.

"From the beginning, the attempt by Chevron to tie up the nation's highest court on a relatively obscure legal issue was more of a delay tactic than anything," said Andrew Woods, an American legal advisor to the Amazonian communities who brought the underlying legal case.

The private lawsuit originally was filed in U.S. federal court in New York in 1993 against Texaco (now Chevron) and is currently on trial in Ecuador at Chevron's request. To transfer the case to Ecuador in 2002, the oil company filed 14 sworn affidavits praising Ecuador's courts and agreed to submit to jurisdiction and be bound by any ruling there.

Once evidence in the Ecuador trial pointed to Chevron's culpability, the oil company began to claim Ecuador's courts were biased against it and tried to shift the liability to Ecuador's government. It also launched a public relations and lobbying campaign in Washington to try to convince the U.S. government to pressure Ecuador's government to quash the case, a strategy that up to this point has backfired.

Among Chevron's recent setbacks:

* Four Democratic Senators (Wyden, Leahy, Casey, Jr., and Durbin), in a letter sent June 25 to the office of the United States Trade Representative, accused the oil giant of meddling in the private lawsuit by lobbying to cancel trade preferences for Ecuador – a move that could cost Ecuador 350,000 jobs.
* Two Chevron lawyers are under criminal indictment in Ecuador, along with seven former Ecuadorian government officials, for lying about the results of a purported remediation in the mid-1990s. One of those lawyers, Ricardo Reis Veiga, had been supervising the case for Chevron but is now unable to travel to Ecuador.
* New York Attorney General Andrew Cuomo has opened a probe of the company to determine if it is misleading shareholders about its financial risk in Ecuador.
* More than $37 billion in Chevron shares (about 28% of all shares outstanding) voted in May to support resolutions criticizing the company's human rights record in Ecuador, Myanmar and elsewhere.

If Chevron had won the right to arbitrate, it would have argued that a provision in the 1965 operating contract required Ecuador to indemnify it for all or part of the losses associated with the environmental lawsuit. A second issue – whether Ecuador breached a 1995 release given to Chevron – will now be litigated before Judge Sand in the coming months.

Ecuador was represented by C. MacNeil Mitchel (NY) and Eric W. Bloom (DC) at Winston & Strawn in Washington, D.C. Chevron was represented by Paul Clement of King & Spalding in Washington, D.C., and Thomas F. Cullen and Louis K. Fisher of Jones Day in Washington, D.C.

New Evidence of Chevron Fraud From Final Judicial Inspections in $27 Billion Environmental Case

Amazon Defense Coalition

FOR IMMEDIATE RELEASE

2009-06-24

Karen Hinton, 703-798-3109 karen@hintoncommunications.com

New Evidence of Chevron Fraud From Final Judicial Inspections in $27 Billion Environmental Case

Latest Evidence from Paid Chevron Expert Clears Path to Final Decision

QUITO, Ecuador - (Business Wire) Evidence that two Chevron lawyers committed fraud in Ecuador apparently has grown stronger with a new court-ordered report finding extensive levels of toxic contamination at two oil well sites that the company claimed to have "remediated" in the mid-1990s, representatives of indigenous and farmer communities said today.

The report was submitted this week to an Ecuador trial court in a high-profile environmental lawsuit where Chevron faces a $27.3 billion liability for dumping billions of gallons of toxic waste into the waterways of the Amazon rainforest over an area roughly the size of Rhode Island. It covers information from the final eight judicial inspections of 102 total performed in the case, clearing the way for a decision in the coming months.

The plaintiffs had charged that the eight inspections were requested by Chevron earlier this year as part of an 11th-hour effort to further delay the end of the trial. That move clearly backfired against Chevron with the results, which were submitted by Dr. Marcela Munoz, a respected Ecuadorian scientist who was appointed by the court but paid by Chevron for the work, said Pablo Fajardo, the Ecuadorian lawyer who represents the communities in the class action case who have pressed the lawsuit since 1993.

"In this case, more inspections produces more evidence against Chevron," he said.

Chevron has reported it expects an "adverse" decision in the case and is preparing for appeals, while representatives from the communities say they will seek to enforce any judgment against the oil giant immediately in U.S. courts based on evidence that Chevron has tried to corrupt the trial process and has stated it will refuse to pay any judgment.

The latest results likely will be used in a criminal fraud indictment pending in Ecuador against two Chevron lawyers and seven former Ecuadorian government officials for lying about the results of the purported remediation in the mid-1990s in exchange for a release from government claims against the company, said Fajardo.

Chevron has attempted to use the remediation as a defense in the trial, but in light of the evidence it has little or no value, said Fajardo. Chevron's continued use of the defense in the face of scientific evidence clearly exposing the remediation as a sham calls into question the company's credibility on all aspects of the trial, he added.

"Not only does the remediation fail as a defense at trial, it has backfired into a criminal indictment against Chevron lawyers who orchestrated a fake clean-up with the apparent help of corrupt Ecuadorian government officials," Fajardo said.

The so-called remediation, performed by Texaco between 1995 and 1998, consisted largely of dumping dirt over a small portion of the 916 unlined pools of toxic waste to hide them from local residents, said Fajardo. All 45 of the "remediated" sites previously inspected during the trial showed extensive and illegal levels of Total Petroleum Hydrocarbons (TPHs), some thousands of times higher than Ecuadorian norms, according to a damages assessment produced in April 2008 by a team of court-appointed experts.

Of the final eight inspections, two were of well sites that Texaco claimed to have "remediated" in the mid 1990s. Both of the sites – Auca 17 and Auca 19 – contained levels of TPHs in the soil and water at levels several times higher than the maximum allowed by Ecuadorian law.

For example, Auca 19 had TPHs at 5,710 ppm, or more than five times the maximum tolerance allowed under Ecuadorian law. Auca 17 reported TPHs at 1,580 ppm, or more than 50% higher than the norm. Chevron had certified both sites as "remediated" to Ecuador's government in the mid-1990s as part of its clean-up plan.

Results from three other sites inspected – Yulebra, Yuca Central, and Auca Central – also reported soil contamination several times higher than Ecuadorian norms, according to reports submitted by Dr. Munoz. (No samples were tested for hydrocarbons at three of the eight sites because the parties did not request them.)

The results are consistent with the damages assessment from April 2008, which found that 100% of the 94 Chevron well sites previously inspected during the trial were extensively contaminated with cancer-causing toxins, some at rates hundreds of times higher than permitted by Ecuadorian law.

The earlier damages report found the oil giant might be liable for up to $27.3 billion in damages for polluting the soils with the unlined waste pits and systematically dumping billions of gallons of toxic waste into Amazon waterways while Texaco (now Chevron) was the sole operator of an oil concession from 1964 to 1990. Experts have dubbed the disaster the "Amazon Chernobyl" and said a clean-up would involve the largest decontamination effort in history.

Chevron's top lawyer in Ecuador, Rodrigo Perez Pallares, signed checks to Dr. Munoz totaling more than $20,000 for his work in preparing the reports on the final eight sites. This is significant because Chevron has tried to claim that similar checks signed by the plaintiffs to other experts in the case prove undue influence, when in fact they were ordered by the judge consistent with Ecuador court rules – as were Chevron's payments to Munoz.

Perez Pallares is one of two Chevron lawyers under indictment in Ecuador. The other is Ricardo Reis Veiga, who is Chevron's associate general counsel for Latin America litigation.

The case was transferred to Ecuador from U.S. federal court in 2002 at Chevron's request. As a condition of the transfer, Chevron agreed to submit to jurisdiction in Ecuador and be bound by any ruling there. The trial in Ecuador began in 2003.